Kiwi Outperforms On Labour Market Beat, Dairy Market Still On Tear

NZD/USD faltered in Tuesday's European hours, which seemed like a function of broader demand for the greenback, but the 50-DMA proved resilient and the pair recovered in the NY session. The NY/Asia crossover brought a spike higher as a solid NZ quarterly labour market report gave the kiwi a shot in the arm, inspiring further unwinding of previous RBNZ easing bets. ANZ joined sell-side desks expecting the OCR to remain unchanged through this cycle, while money markets no longer price any chance of an OCR reduction in 2021.

• Looking into the details:
  • unemployment rate dipped to 4.9% from 5.3% (exp. 5.6%)
  • employment rose 0.6% Q/Q after falling 0.7% in Q3 (exp. +0.1%)
  • participation rate edged higher to 70.2% from 70.1% (exp. 70.3%)
  • wages rose, with average hourly earnings increasing 1.1% Q/Q (exp. +0.3%)
• Federated Farmers published a Jan survey which indicated that NZ farmers are less pessimistic about the economy, with net 43.8% expecting deterioration over the next 12 months, down from 58.7% recorded in the July survey.
• There is good news for NZ dairy market too. Headline price index rose 1.8% at the latest GDT auction hitting best levels since mid-2014, with whole milk prices adding 2.3% (slightly above expectations). Fonterra lifted its 2020/21 milk price forecast by NZ$0.20 to NZ$6.90-7.50 citing strong demand from China.
• NZ housing market remains hot. Barfoot & Thompson said that they sold 60% more homes last month than in Jan 2020, adding that "the most active January we have experienced as an agency for 17 years." The comments came after NZ CoreLogic House Price Index surged 12.8% Y/Y in Jan.
• NZD/USD has added 13 pips and last sits at $0.7205, as the kiwi remains the best G10 performer. A break above Jan 29 high of $0.7226 would open up Jan 26 high of $0.7248. Conversely, a fall through the 50-DMA at $0.7138 would expose Jan 28/18 lows of $0.7106/7096.
• New Zealand's ANZ Commodity Price Index comes out at the top of the hour, while building permits & flash ANZ Business Confidence are due tomorrow.