The kiwi dollar lagged its commodity-tied peers on Wednesday, yet NZD/USD eked out some gains. The reaction to New Zealand's latest labour force survey may have helped keep a lid on the NZD. Otherwise, the pair clung to the coattails of the BBDXY index.
- New Zealand's jobs report was mixed, even as the NZD went offered in initial reaction. The unemployment rate unexpectedly ticked away from record lows, which was driven by weak underlying data. Still, the labour market remains extremely tight, with strong outcomes for labour cost inflation raising concerns over the risk of a wage-price spiral.
- The amount of tightening priced for the August meeting of the RBNZ's Monetary Policy Committee slipped just 3bp as participants parsed the labour market report. The Big 4 kiwi banks have all emphasised upbeat wage figures, with Westpac pushing their forecast peak for the OCR to 4.0% from 3.5%.
- Resilient risk appetite supported high-beta FX later in the day, as equity markets in Europe & the U.S. saw benchmark indices creep higher. Commodity markets were mixed, with the aggregate BBG Commodity Index virtually unchanged on the day.
- The improvement in risk backdrop came on the back of better than expected data prints out of the U.S. as well as the removal of the immediate risk of a forceful Chinese retaliation for U.S. House Speaker's visit to Taiwan.
- NZD/USD trades at $0.6271, little changed on the day. Topside focus falls on Aug 1 high of $0.6353, a break here would expose Jun 16 high of $0.6396. Conversely, bears need a sell-off past Jul 14 low of $0.6061 to jump back into the driving seat.
Fig. 1. NZD/USD vs. BBDXY Index (inversed)