NZ Jobs Report Sends Kiwi Flying, Gets 2021 OCR Cuts Priced Out

NZD caught a bid in Asia after a strong local Q4 jobs report inspired further unwinding of RBNZ easing bets, with money markets pricing out chances for any OCR reductions this year. The unemployment rate unexpectedly dropped to 4.9% from 5.3%, on the back of a decent beat in employment growth & a marginally slower than projected uptick in the participation rate. Evidence that GDT prices are still on a tear (BNZ & Fonterra raised their respective milk price forecasts for 2020/21) & fresh data reinforcing the belief that NZ housing market remains hot helped the kiwi to build on the impetus provided by the stellar jobs report and the Antipodean currency easily outperformed all of its peers from the G10 basket. NZD/USD extended its rally off the 50-DMA tested yesterday, while NZD/JPY rose to its best levels since Apr 2019.

• NZD gains spilled over into its Antipodean cousin, to a degree, albeit BBG trader sources pointed to AUD/NZD sales by macro & leveraged funds after RBA Gov Lowe signalled potential for the RBA shifting its YCC target from Apr '24 to Nov '24. The pair sank for the fourth day in a row as commodity price dynamics (dairy vs. iron ore prices) combined with QE dynamic differential between the RBA/RBNZ & NZ jobs data rendered AUD/NZD heavy.
• Safe haven currencies traded on a softer note as risk sentiment remained positive, with e-minis ticking higher in the wake of blockbuster earnings reports from Alphabet & Amazon.
• The PBOC fixed USD/CNY at CNY6.4669, a 10 pip miss against sell side estimates, which brings misses to +42 pips so far in February. The bank drained a net CNY 80bn of liquidity via OMO's after three days of injections.
• Preliminary inflation data from the EZ & Italy, U.S. ADP employment report, a number of services PMI readings from across the globe and comments from Norges Bank's Bech-Moen as well as Fed's Kashkari, Bullard, Harker, Mester & Evans.