Ahead of New Zealand Employment data

New Zealand’s calendar has employment data tonight, which will be closely watched by market participants, as it might provide an indication on Reserve Bank of New Zealand’s monetary policy stance. The bank meets on February 13, 2019, where no change is expected to the current 1.75% setting for the OCR. RBNZ will end the day with the release of the Statement on Monetary Policy along with a press conference at which they will propose how they are planning to formulate and implement monetary policy during 2019.

2018 economic data suggested that the country is facing improving economic growth, minimising odds for a rate cut.

The fourth quarter of 2018 showed that consumer prices (CPI) had risen by 0.1% q/q versus expectations of 0.0%. The annualized figures for Q4 2018 came in at 1.9%, again better than the expected 1.8% and the same as Q3. The Construction, Transport and Alcohol & Tobacco sectors all saw increases over 3.5%, and the closely watched Housing sector also rose over 3%. Communications, and in particular the Telecommunication Equipment sectors, were the main drags down, 3.7% and 21% respectively. Meanwhile, last week, the external trade report revealed a NZ$264 mln surplus in December from a NZ$955 mln deficit in November.

As of today’s data, Employment change is projected to increase by 0.2% in Q4 (q/q, sa) after the 1.1% increase in hiring seen in Q3. The employment gain has been well in excess of projections so far. The unemployment rate is projected to edge higher to 4.0% from 3.9%. Any surprise in the unemployment rate tonight is unlikely to amend the RBNZ approach.

Interest however could be shifted to wages growth. Despite a low unemployment rate, New Zealand’s annual wage inflation, as measured by the labor cost index, eased to 1.8 percent in the third quarter of 2018 from 1.9 percent, as private sector wage growth slowed to 1.9 percent from 2.1 percent.

Meanwhile in the forex market, New Zealand Dollar has consolidated with a near 1% loss versus the US Dollar on the day so far, however it remains close to 7-month high above the 61.8% fib. level from the downleg seen in December. The pair remains above all 3 daily MA, with immediate Support at 0.6820. If it sustain gains above this area within the week, more of upside momentum is expected. A break of the latter however could trigger attention towards 200-day SMA, at 0.6760. To the upside, Resistance holds at 3-day highs and day’s R1 at 0.6910.

Click here to access the Economic Calendar

Andria Pichidi

Market Analyst

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