Later tonight we will be getting the most important data release of the week for NZD. This is probably the only chance the currency has to revert its current trend!
However, expectations are that the labor market hasn’t improved significantly since the last measure. Consequently, this won’t change the outlook for the RBNZ’s next meeting.
New Zealand publishes its employment figures only once per quarter. That makes them both more anticipated by the market, as well as behind the times.
A lot has changed in the world of finance since the job measurements were taken. Chief among these changes is that the US and China finally signed a trade agreement. There’s also the unfortunate spread of the coronavirus.
The data we get might be a bit out of step from other fundamentals. However, it is still relevant to consider in terms of the RBNZ’s dual mandate.
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What We Are Looking For
The consensus among economists is that the fourth quarter will, broadly speaking, repeat the less than stellar third quarter. The bit of data that usually captures the market’s attention, Employment Change, is expected to grow by 0.3% compared to 0.2% in the prior quarter (note that is within the rounding margin.)
Despite holding the line, that would still be relatively poor performance, since typically Q3 is when New Zealand has the worst jobs data of the year. And, in the final quarter, it’s already supposed to start to improve as tourism grows.
The employment rate is projected to stay at 4.2%, which is apparently within the comfort zone for the RBNZ. Expectations are for labor costs to slow just slightly to 0.5% growth from 0.6% in the prior quarter.
Going Forward
The thing that worries most analysts with regard to New Zealand’s jobs market is what’s already dominating world news: the spread of the coronavirus. This is likely to have a two-fold impact on the Kiwis.
The most immediate is the travel prohibition to New Zealand from China, which is the largest group of tourist arrivals. Many Chinese tourists travel not just to visit, but also for shopping. So, retail sales are expected to be impacted until the disease is contained and travel conditions normalize.
It’s the Kiwis’ turn
The second effect is on the country’s largest trade partner, which could mean this time around New Zealand will be more affected than Australia.
The outbreak has closed stores and considerably discouraged people from shopping. This has affected consumer demand all across China.
New Zealand primarily exports consumer goods such as dairy and seafood to China. And it’s generally at the higher end of the price range!
While this helped New Zealand to weather the effects of the tariff war, affecting Australia more, this time it could be that the roles have reversed with implications for AUDNZD.
We won’t get another batch of employment data until the important summer season is already over. The RBNZ could turn to other proxy measurements if they try to head off potential fallout in the jobs market.
So far, though, it seems that it’s very unlikely the central bank will cut rates when it meets next week.
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