- AUD/NZD bears move in with a focus on the recent lows and eye 1.1050.
- The RBNZ and RBA are in focus with inflation the task at hand.
At 1.1068, the price is flat on the day but is moving below the US equities hours lows in Tokyo near 1.1075. This is an opening risk for a continuation to the downside for the day ahead. The kiwi is firmer in Asia as takes on the US session highs vs the US dollar near 0.6280, printing a high of 0.6274 so far.
New Zealand’s second-quarter Unemployment Rate came in a little higher than the markets were expecting, but in the view of analysts at ANZ Bank, it doesn’t matter for the monetary policy outlook.
”Flat employment growth despite still-high demand for labour suggests the economy has run out of labour resource to keep growing, and with wage inflation running higher than anyone was expecting, these data suggest pipeline domestic CPI inflation pressures are far too strong.”
”We think the data fans, rather than fades the case for OCR hikes, and in that regard, the Kiwi may find support from rising short-end rates over coming weeks. But going against that, US interest rates are also rising, and there’s been no let-up in hawkish Fed rhetoric, and for the time being, that is supporting a USD DXY bounce. US jobs data tomorrow night will be crucial; let’s see how that pans out.”
The analysts said that ”the risk of a wage-price spiral clearly isn’t any lower despite the small lift in the unemployment rate. In fact, with average hourly earnings growth at 7% y/y (vs Consumer Price Index inflation at 7.3%), the Reserve Bank of New Zealand should be very worried about high domestic inflation sticking around long after global inflation (ie tradables) has slowed.”
”One of the key takeaways for Australia is that NZ’s success has been underpinned by an incredibly tight labour market. Australia looks similar. While wages are yet to take off here in Australia, the tightness in the labour market raises the risk that we go down the same path as NZ.”
Despite the uncertainties, the Reserve Bank of Australia is unlikely to take any chances with inflation, analysts at Rabobank argued.
”It’s rhetoric is clear insofar as ‘Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time’.”
