NZD/USD Falters On Risk Off/Higher US Yields, Q1 Employment Data Coming Up

NZD/USD mostly tracked sharply lower post the Asia close on Tuesday. In early Wednesday dealings we sit just up from Tuesday lows, last near 0.5890. The pair lost 1.5% yesterday to be the worst performer in the G10 space. Higher beta plays saw the alrgest losses (A$ lost just over 1.4%), the BBDXY rose 0.60%.

• A firmer-than-expected Q1 employment cost reading in US provided the latest ‘hawkish’ input for FOMC-dated OIS, leaving ~31bp of cuts priced through ’24 vs. ~35bp pre-release. Even within the Chicago Business Barometer details prices paid rose 6.7 points to 69.3, the highest level since August 2023, and 5.7 points above the prior 12-month average of 63.6.
• Downside pressure on equity markets provided an additional tailwind for the greenback, with potential month-end dynamics also bolstering the supportive greenback tone.
• For NZD/USD, we are back sub the 20-day EMA (0.5945/50), the 50-day around 0.6005 hasn't been tested yet. Recent YTD lows rest at 0.5852 (Apr 19).
• Headlines have crossed from the RBNZ's financial stability report. The financial system is well placed to handle an economic downturn/further rise in arrears. Most mortgages have adjusted to higher rates, which is impacting spending for some consumers. The central bank also sees risks of persistent global inflation pressures, which could leave rates higher for longer.
• Coming up we have Q1 labour market data. The unemployment rate is forecast to rise to 4.2% (prior 4.0%). Employment growth is forecast at 0.3% q/q, from 0.4% prior. Wage measures are forecast at 0.8% in q/q terms.