Market Analysis

RBNZ waiting to assess upcoming jobs and inflation data

The New Zealand economy is set to release a raft of employment and inflation data this week, with the data having the potential to determine whether the Reserve Bank of New Zealand will cut interest rates next week. Expectations are currently extremely low that the RBNZ will cut interest rates next week, following a series of rate reductions from the central bank.

Recent better-than-expected housing and inflation data have helped push back calls for another rate cut from the New Zealand central bank next week, and also boosted the New Zealand Dollar to its highest trading level since August against the U.S Dollar.

New Zealand’s unemployment rate is expected to have risen to 4.0 percent, during the third quarter of this year, as domestic growth prospects continue to decline. A much-steeper rise in the official unemployment rate would almost certainly place an interest rate cut back on-the-table table at the November 13th policy meeting.

Later this week the Reserve Bank of New Zealand is also going be releasing its fourth-fiscal quarter inflation projections for the New Zealand economy. Market participants will be looking for a headline number close to two percent, if the number comes in close to the central banks target rate it should be positive for the New Zealand Dollar, while any downside shocks would likely be heavily negative for the currency.

The New Zealand Dollar has been rising against the greenback as expectations recede that the RBNZ will follow through and cut rates again this month. The NZD/USD pair had fallen to levels not seen since September 2015 last month, as traders increased bearish bets towards the New Zealand Dollar in anticipation of policy action from the Reserve Bank of New Zealand.


NZD/USD Daily Candlestick Chart | Source: ActivTrader

NZD/USD Daily Candlestick Chart | Source: ActivTrader


The New Zealand Dollar has plenty of upside potential this week against the U.S Dollar if the fundamentals and the technicals start to align. Continued gains above the 0.6450 level could expose further upside towards the 0.6580 resistance area. Failure to surpass this area could prompt a decline back towards the 0.6350 support region.


Written by Nathan Batchelor, External Analyst, ActivTrades

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