ING\u2019s Francesco Pesole expects New Zealand\u2019s Q2 labour data to broadly match the Reserve Bank of New Zealand\u2019s May projections, which implied one to two hikes in Q3. He favours a hike in September or October, with rising conviction for September. Pesole sees NZD\/USD holding near 0.585\u20130.590, with a year-end target at 0.59 and 0.60 increasingly attainable.<\/p>\n
Labour data seen matching RBNZ view<\/p>\n
“New Zealand releases its 2Q labour market data tonight. High-frequency indicators point to only 0.1% QoQ employment growth, while unemployment is expected to edge up from 5.3% to 5.4%. That would broadly match the Reserve Bank of New Zealand\u2019s May projections, which implied 1-2 hikes in 3Q. Since July\u2019s hike, markets have continued to price around 20-25bp of tightening for the 2 September meeting.”<\/p>\n
“We have long favoured a hike in either September or October, but our conviction around a September move has increased recently. The main reason is that markets may be overstating the scale of the tightening cycle, with 75bp priced in by February.”<\/p>\n
“We suspect two of the six policy committee members were not fully aligned with May\u2019s hawkish shift, meaning the narrative may ultimately settle around a smaller 50bp “insurance” tightening cycle. If so, that would argue for an earlier move in September and then a pause.”<\/p>\n
“NZD has been one of the stronger performers since the Fed<\/a> meeting, clearly outpacing AUD after the latter suffered a sharp dovish repricing following a soft CPI release. NZD\/USD may remain around the 0.585-0.590 range for now, but a September hike delivered with a slightly dovish tone could prompt some correction and open the door to a period of AUD outperformance relative to NZD.”<\/p>\n “Our year-end target for NZD\/USD is currently 0.59, though 0.60 is looking increasingly attainable.”<\/p>\n