(03 MAY 2017)DAILY MARKET BRIEF 2:NZD holds ground amid strong job report

The USD extended gains against most of its peers ahead of today’s FOMC meeting and ADP job report. The New Zealand dollar was among the few that was able to resist against the increasing demand for the greenback. NZD/USD rose to 0.6969 this morning amid a solid job report. The unemployment rate fell to 4.9% in the March quarter, widely beating market expectation of 5.1% and previous reading of 5.2%. The surprise increase in the participation (70.6% versus 70.5%), together with a solid growth in employment (+5.7%y/y versus 5.3% expected).

However, the tightening of the job market failed translate into wage growth. Indeed, average hourly earnings rose only 0.3%q/q, while market participants were expecting a reading of 0.7%. This weak reading should keep the RBNZ on the back foot at its next meeting on May 11th as it gives Governor Wheeler an excuse to stay on the dovish side for another round. The Aussie was heavily sold against the Kiwi this morning with AUD/NZD sliding 0.50% to 1.0795. The closest support can be found at 1.0755 (Fibonacci 38.2% on January-March rally). If broken, the door is wide open towards 1.07, then 1.06.

By Arnaud Masset