NZD outperforms on stronger labour market data and renewed risk appetite
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Daily Currency Update
Risk sentiment recovered further through trade on Wednesday as markets continue to square positions following Monday’s flash crash. The New Zealand dollar outperformed, buoyed by renewed risk demand and a stronger-than-anticipated domestic labour market report. Employment data did little to guide investors as near-term monetary policy expectations printing stronger than expected. While the unemployment rate rose to a 3-year high, employment growth rose steadily as well, suggesting the labour market may be stronger than the market anticipated. Further analysis does suggest conditions are weakening and with the economy mudded in recession but we still expect the RBNZ will be forced to start its easing cycle in the coming months. That said, the stronger print afforded the NZD a boost and with risk sentiment improved, the NZD jumped back through US$0.60, setting and overnight high of US$0.6025 before edging lower to open this morning just short of US$0.60.Our attentions turn now to the RBNZ survey of expectations with 2-year inflation expectations key in shaping near term rate expectations. After last week's US non-farm payroll print, the US jobless claims will be keenly watched for further signals of labour market deterioration.
Key Movers
Another day and another big move for JPY. The yen corrected significantly lower through trade on Wednesday following comments from Bank of Japan (BoJ) Deputy Governor Uchida. Uchida made two comments that acted as an umbrella, shielding markets from extended volatility and carry trade uncertainty. The yen gave up 1% to the USD, settling just below 146.90, having allowed session highs near 148. Buoyed by the weaker yen the USD DXY index edged higher on the day, up 0.2% as the euro struggled to break outside a narrow range and the GBP couldn’t sustain a break back above 1.27. The VIX volatility index, a measure of stock market volatility, tracked higher through the back end of the overnight session as markets continue to lick their wounds following Monday’s flash crash. Markets remain fragile and it won’t take much for sentiment to sour again. Our attentions now turn to US jobless claims as the only headline item on an otherwise quiet docket.Expected Ranges
- NZD/USD: 0.5920 - 0.6020 ▲
- NZD/EUR: 0.5420 - 0.5520 ▲
- GBP/NZD: 2.1000 - 2.1400 ▼
- NZD/AUD: 0.9120 - 0.9220 ▲
- NZD/CAD: 0.8200 - 0.8300 ▲