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FX & Equities: Kiwi's Slump Continues on Employment Data

Posted by Akhilesh Ganti on Aug 5, 2014 11:00:00 PM

New Zealand's employment report (see table), released quarterly, was a mixed bag that was headlined by an encouraging reduction in the unemployment rate but disappointed once you delved into the details. Even the unemployment rate was a bit misleading given the drop in the participation rate. The gist of the release was that employers hired workers at a slower pace than had been forecast which seems as sure a sign as any that the recent spate of rate hikes by the RBNZ has had the intended effect of slowing down economic growth.

Factor in another poor dairy auction that saw prices plunge again, they are now 46% from February's peak, along with Governor Wheeler's July 24, 2014 proclamation that it is "prudent there now be a period of assessment before interest rates adjust further" and the most probable conclusion is that rates are on hold, possibly for the rest of this year.

Economic Data - {source: Bloomberg}

Country Event Period Survey Actual Prior Revision
New Zealand Unemployment Rate 2Q 5.80% 5.60% 6.00% 5.90%
  Employment Change QoQ   0.70% 0.40% 0.90% --
  Employment Change YoY   4.00% 3.70% 3.70% --
  Participation Rate   69.30% 68.90% 69.30% 69.20%
  Pvt Wages Ex Overtime QoQ   0.50% 0.60% 0.30% --
  Pvt Wages Inc Overtime QoQ   0.50% 0.60% 0.30% --
  Average Hourly Earnings QoQ   0.60% 0.50% 0.70% --

NZD/USD, which had already come under pressure after the dairy auction, immediately spiked lower to 0.8422 just ahead of the ascending trendline support at 0.8420 before stabilizing a bit. The confluence of events has the pair targeting key weekly support at 0.8402 which, if breached, could see a fairly sharp drop to the 0.8250 level.

{chart: WWM CurreneX}(click to enlarge)
NZD employment 080514

Ranges:{WWM's New ALPHA Trader - DAILY charts [EUR, GBP, AUD, YEN, GOLD, OIL, DXY]}(click to enlarge)

FX 080614

Equities:{WWM's New ALPHA Trader - DAILY charts [Dow30, SP500, Nasdaq100, Nikkei225, China, HKG40, Nifty50, ASX200]}(click to enlarge)

STOCKS 080614

 

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