Beleaguered Kiwi Rebounds on Labour Report

Daily Analysis - 01/11/2017

New Zealand Unemployment Rate Touches 9-Year Low

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The New Zealand dollar was the standout performer in an otherwise quiet session of Asian trade after latest labour market figures showed unemployment fell while wages grew during the third quarter. The Kiwi dollar gained as much as 1.00% against the US dollar early Wednesday before pulling back modestly.

Kiwi Dollar Climbs to 1-Week High


New Zealand's jobless rate tumbled to a nine-year low last quarter, boosting hopes for a revival in wage growth and extricating the local dollar from a 17-month trough. The unemployment rate fell to 4.60% in the third quarter, marking the lowest reading since the fourth quarter of 2008 and below of forecasts of 4.70%. Wages grew 0.70% during the period to bring the annualized pace of gains to a five-year high of 1.90%.

The strong labour demand buoyed the participation rate to a record 71.10%, a surge of 1.10 percentage points in just one quarter. The New Zealand dollar remains elevated on the session, trending above 0.6900 after touching a one-week high of 0.69180 earlier. The Kiwi dollar had come under increased bearish pressure in recent weeks amid investor fears that the new government’s left-leaning policies, including a restriction on foreign investment, could stifle growth.

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US Home Prices Touch All-Time High


House prices in the United States finished the summer on a high note, a trend which is thwarting many aspiring buyers and potentially hurting sales. The S&P CoreLogic Case-Shiller US National Price Index continued to rise in August, recording a 6.10% annual increase and hitting an all-time high in the process. This was markedly better than the 5.80% gain forecast by economists polled by Reuters.

Nine of the twenty cities tracked by the gauge witnessed yearly price gains in August that were faster than those recorded in July, with Seattle, Las Vegas, and San Diego posting the strongest gains. The Case-Shiller index covers almost half of US homes, comparing current prices with those in January of 2000 before constructing a three-month moving average to smooth out the data. In the meantime, Nasdaq futures closed at a fresh record on Tuesday and continue to climb ahead of the legislatures release of a tax cut proposal.

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Surging Energy Costs Bite Australia Manufacturing


Growth in Australia’s manufacturing firms slowed in October as higher energy costs and a stronger Australian dollar created headwinds for the sector. On a seasonally adjusted basis, the Australian Industry Group’s Manufacturing PMI dropped -3.1 points to 51.1 last month, leaving it at its lowest level in one year. The PMI tracks monthly changes in activity across Australia’s manufacturing units.

A reading above 50.0 suggests activity levels are improving while any figure below signals they’re deteriorating. Three of the eight sub-indices measured by the group fell during the month, led by production, exports and inventories. Despite the tepid report card, the sub-index of new orders stood at 55.1, pointing to a reasonable likelihood of expanded activity in the upcoming months. AUDUSD is trending just below the session highs, with the pair currently hovering around 0.7675.

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Canadian GDP Unexpectedly Shrinks


A slump in manufacturing spurred a contraction in the Canadian economy during the month of August, marking the first monthly dip since October of last year. Gross domestic product fell by -0.10% month-on-month to CAD$ 1.74 trillion ($1.36 trillion) following July’s flat reading of 0.00% and the consensus estimate of economists anticipating a 0.10% tick higher. According to Statistics Canada, declines in manufacturing, mining and oil extraction "more than offset" expansions in other sectors.

The surprise data underscored the belief that Canada’s economy slowed significantly after the robust performance recorded during the first half of the year, and could force policymakers at Bank of Canada to keep interest rates steady through the end of the year. Despite the headline disappointment, economic output grew by a respectable 3.50% on an annualized basis. The USDCAD pair is trading flat on the session after briefly topping 1.2900 and encountering resistance near 1.2910.

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