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Kiwi comeback: Politics isn’t everything

The New Zealand dollar was hit hard by the elections, which eventually saw a change of guard at the top. Yet the economy also makes its mark on the kiwi dollar.

New Zealand reported a rise of 2.2% in employment, far better than 0.8% that was expected and recovering from a small drop beforehand. Year over year, the economy saw 4.2% more jobs, also much better than 2.5% expected.

The unemployment rate dropped to 4.6% and this came despite a rise in the participation rate: no less than 71.1% against 70% in Q2 2017. For comparison, the participation rate in the US is only around 63%.

Wages are up 1.2% q/q, above expectations but not excelling like the other numbers. Nevertheless, this is a superb report.

NZD/USD was trading around 0.6840 before the release and jumped above resistance at 0.6880 in the immediate aftermath. The pair continued north and reached 0.6925 at the time of writing. The next cap is the obvious line of 0.70.

The jump may not seem huge in terms of pips, but this reflects a rise of well over 1.2%, or equivalent to 140 pips in EUR/USD.

New Zealand publishes its employment data only once per quarter and naturally, this publication has a bigger impact than jobs reports elsewhere.

What’s next? It all depends on the central bank, which may receive an  employment mandate. The employment situation looks good and may warrant a rate hike, contrary to the dovish expectations.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.