Kiwi rallies thanks to weaker than expected US employment numbers
Monday 11 March, 2019
Daily Currency UpdateThe New Zealand dollar closed last week higher above 68c having initially witnessed lows of 0.6744 in the early Asian session. The rebound was sparked by disappointing US jobs data which reported their local economy added just 20,000 jobs in February, compared with estimates for a gain of 180,000 positions. However, the unemployment rate dropped to 3.8 percent in February and wages grew at the fastest pace in nearly a decade. On the local front Manufacturing data released on Friday did little to excite the Kiwi, the volume of manufacturing sales rose 2 percent in the December quarter from the September quarter, led by a 4 percent boost in dairy and meat products manufacturing, but the value of those sales fell 0.5 percent, Statistics NZ says. Looking ahead, there are no major reports out of New Zealand this week, so traders are not likely to change their minds about a future rate cut by the RBNZ. This is likely to limit any gains.
Key MoversThe Australian dollar closed down for a second consecutive week against the US dollar losing ground on the back of poor Chinese trade data released early Friday. It fell to 0.7002, a level last seen early January. While the soft Chinese monetary growth report for February has seen the Aussie dollar fall against most of the major crosses in early trade on Monday morning. There are no scheduled macroeconomic releases in Australia today. All attentions will turn this week to Tuesday’s NAB Business Confidence Survey. From a technical perspective, the AUD/USD pair is currently trading at 0.7040. We continue to expect support to hold on moves approaching 0.7000 while now any upward push will likely meet resistance around 0.7060.
The Pound fell on Friday against the Greenback as British Prime Minister Theresa May urged the European Union to make “just one more push” to break the deadlock over Brexit by offering her changes to a deal. Sterling traded as low as 1.3002, its weakest since Feb. 22, as disappointment that a revised Brexit deal is unlikely to materialise soon sapped demand. On the release front today, the Bank of England will release Consumer Inflation Expectations, previously at 3.2%. From a technical perspective, the GBP/USD pair is currently trading at 1.2984. We continue to expect support to hold on moves approaching 1.2950 while now any upward push will likely meet resistance around 1.3315.
The US dollar retreated on Friday against most major currencies as markets digested a mixed labour report, non-farm payrolls added just 20,000 jobs in February which was the smallest gain since September 2017 and compared with estimates for a gain of 180,000 positions. However, the unemployment rate dropped to 3.8 percent in February and wages grew at the fastest pace in nearly a decade. The US Dollar Index was knocked of its perch of 97.20 and dropped down to a low of 97.25 following the report. In other news, the Commerce Department said US housing starts surged 18.6% to a seasonally adjusted annual rate of 1.23 million units in January, well above the Investing.com estimate for a 15% rise above 10%. Investors will be looking ahead as a raft US economic data is due to be released: US Retail Sales, Durable Goods, Consumer Inflation and Producer Inflation. Fed Chair Powell is also scheduled to speak.
The Euro dropped over a full cent on Thursday evening following the surprise decision to re-introduce quantitative easing and delay any future possibility of interest rate hikes. With growth and inflation both revised downwards the single currency unit fell below 1.12 for the first time in over two years. Reversing losses on Friday, the EUR/USD managed to bounce off two-year lows and climb 0.5% following mixed employment results in the United States as Non-Farm Employment change disappointed markets and retreated from January’s bullish result. With the technical outlook now looking bearish, new 2019 lows look to be short term support at 1.1175 with any upside to be capped a 1.1300. Opening at 1.1231, this evening sees the release of German industrial production and trade balance figures.
The Canadian dollar traded in positive fashion on Friday as a strong employment print domestically saw the Loonie trade 0.4% higher against the greenback, as 55,900 new jobs were added to the market. Growing for the second consecutive month, the Canadian labour market is off to its best start since 1981 with employment rates steady at 5.8%. Year on year average hourly growth was also strong up 2.3% compared to 1.8% in January. The USD/CAD moved to 1.3405 from its open of 1.3460, as the Greenback was also sold off following a disappointing non-farm employment release, allowing the Loonie to claw back continued losses seen since the start of March. Opening this morning at 1.3415, movements will be dictated by the release of Retail Sales this evening in the United States, with Federal Reserve Chair Jerome Powell due to discuss the economic outlook in a rare interview with 60 minutes on CBS in a couple of hours.
- NZD/AUD: 0.9605 - 0.9720 ▲
- GBP/NZD: 1.8900 - 1.9290 ▼
- NZD/USD: 0.6710 - 0.6810 ▲
- NZD/EUR: 0.5980 - 0.6100 ▲
- NZD/CAD: 0.9040 - 0.9150 ▲