NZD data dependent, high demands to get excitement back - BNZ

FXStreet (Bali) - According to Economist at BNZ, following last week's dovish RBNZ, it will take a lot more strength in the NZ data to get the markets excited to buy back the NZ Dollar.

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With the Reserve Bank sounding less convinced about lifting its policy cash rate any further, it will probably take a lot more strength in the NZ data to get the markets excited.

So even the quarterly employment gain of 0.8% we expect for Wednesday’s Q3 Household Labour Force Survey (HLFS) – generating annual growth of 3.2% (+74,000) and a further drop in the unemployment rate, to 5.4% – might fail to impress.

Then again, we admit this might be pushing it, when there are clear risks of disappointment in the Q3 HLFS numbers. On the hiring side, for example, September quarter decisions had an election to be wary of. In light of this, even market expectations, which are for a 0.6% jobs gain for the quarter and the jobless rate dipping to 5.5%, from 5.6% in Q2, might be over-egged.

And even if employment growth keeps barrelling on in Q3, closer to what we think, it might not be enough to soak up all the extra labour supply coming by way of soaring (net) immigration, such that the unemployment rate doesn’t fall any further. Frustration on the jobless rate could also come if the participation rate rebounds by more than the 0.1 percentage points we (and the markets) expect.

So beware the possibility of a not-so-strong headline number in Wednesday’s HLFS. But note that any disappointments are likely to be transitory or technical in nature. Fundamentally, New Zealand’s labour market is looking full of beans.