NZD rises after US payrolls report; eyes on QV and QSBO; Canada also making jobs progress

by Kymberly Martin

NZ Dollar

The NZD/USD was one of the strongest performers following the US payrolls release. It ended the week at 0.8600.

There was not too much pulse in the NZD ahead of Friday night’s US payrolls data.

After the event, the kiwi burst higher along with its Trans-Tasman peer. Consequently the NZD/AUD was fairly range-bound, ending the week around 0.9260.

Our forecasts see the NZD/AUD trading broadly in a 0.9200-0.9400 range through this year, while we recognise this is a little above ‘fair value’.

The most notable moves on the crosses on Friday night were for the NZD/GBP and NZD/EUR. These both took a step higher after the US payrolls release. They subsequently held onto most of their gains to end the week at 0.5190 and 0.6280 respectively.

Today is a relatively quiet start to the week with only NZ QV house prices scheduled for release. Maybe these will show some signs of cooling in the housing market, which have not yet been very obvious from the array of housing indicators we (and the RBNZ) track.

The data highlight of the week will not coming until tomorrow, when the Quarterly Survey of Business Opinion will be released.

It looks likely to be even stronger than the previous release in January.

We expect increased impetus across the range of activity and inflation gauges i.e. nothing to challenge the NZD’s heights at this point. Key support for the NZD/USD is seen at 0.8500. Resistance will likely be encountered at 0.8640.

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Majors

Following the US payrolls release the AUD and NZD outperformed along with a strong rally in emerging market currencies.

Friday night was all about the much anticipated March US payrolls. They came in not far from official consensus expectation, at 192k (200k expected). The previous month was revised up to 197k from 175k. This confirmed that previous data weakness was largely due to severe winter weather.

The unemployment rate was unchanged at 6.7%.

However, on the release, US Treasury yields fell quite sharply. It appears that going into the release, investors had been positioned for a higher ‘whisper number’.

After some harsh volatility, the USD index followed US Treasury yields lower into the close. It ended the week at 80.40.

Key beneficiaries were emerging market currencies (the BRL rose 2.0%) and AUD and NZD. The JPY also performed well, so the reaction was not one of simple ‘risk on’. In fact, US equities performed badly with the S&P500 closing down 1.25% and NASDAQ down 2.60%.

The AUD/USD was the key outperformer, rising around 0.60% after the release, to end the week at 0.9290. Friday’s CFTC/IMM data showed that speculative AUD short positions have been almost completely unwound (-4.9k from -20.5k). Not long ago these short positions were at historic extremes. The highlight for the AUD this week will be Thursday’s employment report.

The JPY also strengthened following the payrolls release, as the market weighed the prospects for relative monetary stimulus from the respective central banks. The BoJ will meet tomorrow. It is not expected to announce any additional stimulus at this meeting. However, speculation is that the Bank could double its purchases of exchange-traded funds in a further round of monetary easing in coming months. This could inspire further JPY weakness. For now the USD/JPY has ended the week at 103.30.

Alongside US payrolls, Canada also released its employment report on Friday night. It was shown adding 42.9k jobs (22.5k expected). The jobless rate declined to 6.9%, a post GFC low. The USD/CAD dropped from 1.1020, to below 1.0960, before ending the week at 1.0980.

The only notable data release scheduled for tonight is German industrial production.

All its research is available here.