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NZD

13 Apr 2023

Australian labour market: As good as it gets

The Australian labour force report is notoriously volatile, and the March data generated yet another, albeit positive, surprise. Employment rose more than anticipated, with 53,000 jobs added in the month. This follows the ~64,000 jobs created in February. The mix was also favorable, with full-time employment leading the way (+72,200 in March). Labour market conditions remain tight. The employment-to-population ratio is historically high (now 64.4%), as is the participation rate, while unemployment is still very low. At 3.5% the unemployment rate remains near the lowest it has been since the early-1970’s. Indeed, on the monthly data going back to 1978,...

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11 Apr 2023

US CPI in focus

• Calm markets. Focus is on tonight’s US CPI. Headline inflation should mechanically slow, but core inflation could remain high. This can support the case for further tightening by the US Fed.• AUD mixed. AUD slightly higher against the USD, but remains under pressure against EUR and GBP as monetary policy outlooks diverge.• NZD underperformer. Despite last week’s larger RBNZ rate hike, NZD has fallen back. Markets are starting to factor in a RBNZ ‘policy mistake’. Markets were relatively calm overnight, with tonight’s US CPI in focus (10:30pm AEST). The US S&P500 ended the day flat, with the tech-focused NASDAQ...

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05 Apr 2023

Recession worries

• Recession worries. Softer US labour and services data has fanned recession fears. Cyclical assets have weakened. US bond yields have fallen.• Firmer USD. The USD has edged up with safe-haven flows counteracting the step down in rate expectations. NZD unwound yesterday’s spike generated by the larger RBNZ rate hike.• AUD/NZD lower. AUD/NZD hit a fresh 2023 low after the RBNZ announcement. We expect AUD/NZD to rebound over the medium-term. The RBNZ’s actions should lead to a meaningful NZ downturn. Markets have remained on the defensive overnight as US recession risks continue to build. US equities slipped back. The S&P500...

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05 Apr 2023

Cross-Check: AUD/NZD – RBNZ Shock & Orr

AUD/NZD has slipped below ~$1.0630, touching a new 2023 year-to-date low in the wake of the diverging RBA and RBNZ decisions and shift in relative interest rates. The policy-driven Australia-NZ two-year swap spread has slumped to -175bps, the most negative since mid-2007. In contrast to the RBA who ‘paused’ its rate hike cycle and softened its conditional tightening bias at its April meeting (see Market Wire – RBA: over and out), the RBNZ unleashed its inner hawk and delivered another outsized 50bp hike. Consensus expectations were looking for a smaller 25bp lift, so the direction of travel wasn’t surprising, just...

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04 Apr 2023

Rate expectations JOLTED

• Shaky sentiment. US equities and industrial metals eased back. The USD weakened, tracking the fall in US yields. EUR higher, USD/JPY lower.• US labour market turning. US JOLTS report weaker than expected. Tighter conditions are starting to work. But there is still a long way to go.• AUD underperformer. RBA pauses and waters down its guidance. RBNZ expected to hike by 25bps today, but could it also tweak its language? A more cautious tone across markets with US equities giving back some ground (S&P500 -0.6%), industrial metals easing (copper dipped ~0.9%), and US bond yields falling. US 2yr yields...

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