NZ dollar rallies ahead of employment data, RBNZ stability report
Risk was back on as Middle East tensions abated.
The New Zealand dollar gained against the greenback ahead of local employment figures expected to show an improving jobs outlook before the Middle East conflict really took hold.
Meanwhile, the Reserve Bank will give its latest update on the health of the nation’s financial sector, coming hot on the heels of earnings from three of the big four lenders showing heightened fears that the energy shock will stress borrowers’ balance sheets.
Channel Infrastructure’s annual meeting will provide an insight into efforts to firm up New Zealand’s domestic fuel supply as prime minister Christopher Luxon returns from Singapore where he secured a fuel supply deal with the Southeast Asian nation.
And soothing words about the Middle East conflict by US defense secretary Pete Hegseth and Iranian foreign minister Abbas Araghchi saw oil prices ease, while stocks rallied in the US and Europe.
Stable jobs
The kiwi dollar rose to 58.91 US cents at 7am in Auckland from 58.57 cents yesterday ahead of employment figures from Statistics New Zealand, which economists predict will show a stable unemployment rate at 5.4% and modest wage growth.
The data largely predate the outbreak of the Middle East conflict, which has knocked the outlook for the global economy as fuel prices shot up and central banks fret about a second round of price hikes. The Reserve Bank of Australia raised its target cash rate a quarter-point to 4.35% yesterday, saying it was seeing signs of second-round inflation.
“The household labour force survey for Q1 is released today, and we forecast the unemployment rate to edge up to 5.5% from 5.4%,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “While employment is expected to rise, we think the increase in the labour force will more than offset it.”
Bond traders have fully priced in a quarter-point hike by New Zealand’s Reserve Bank at the July meeting, with an outside chance predicted at the May 27 review.
The Reserve Bank’s six-monthly financial stability report due today follows first-half earnings from ANZ Group Holdings, Westpac Banking Corp and Bank of New Zealand-parent National Australia Bank, all three of which showed the major lenders boosting their provisioning for bad debts as a result of the Middle East conflict.
Robust system
New Zealand’s concentrated banking system typically returns a clean bill of health with the big four banks well-capitalised and able to withstand severe downturns.
Australian futures are pointing to a 0.6% gain for the S&P/ASX 200 index when trading opens across the Tasman, after two days of declines across the Tasman. New Zealand’s S&P/NZX 50 index fell 0.5% on Tuesday, snapping a four-day rally.
Wall Street set a stronger lead for the antipodean markets, with the S&P 500 up 0.9% in late trading, while the Dow Jones Industrial Average was up 0.7%, with Caterpillar, Apple and Cisco Systems leading gainers on the blue-chip index. The tech-heavy Nasdaq Composite advanced 1.1%, with chipmaker Advanced Micro Devices due to report after the bell.
Brent crude oil futures fell 4.1% to US$109.68 a barrel as US and Iranian officials played down the recent flare-up in tensions, saying the ceasefire was still in place.
Europe was broadly stronger as well, with Germany’s DAX up 1.7% and France’s CAC 40 gaining 1.1%. The UK’s FTSE 100 dropped 1.4%, with HSBC among decliners after missing earnings expectations. The yield on 10-year gilts rose 7 basis points to 5.06% and 30-year gilt yields hit their highest level since 1998 ahead of local body elections that may trigger a leadership challenge to prime minister Kier Starmer.
The kiwi dollar traded at 43.48 British pence from 43.35 pence yesterday.
NZX-listed Channel Infrastructure holds its annual meeting in Auckland today, where auditor EY’s fees are the only resolution to be voted on. The import terminal is busily expanding its domestic diesel storage to give the government more flexibility in managing fuel stocks and is also rumoured to be a potential bidder for Exxon Mobil’s New Zealand assets.
Dairy companies will be in focus today after prices rose at the latest Global Dairy Trade auction, with the GDT price index up 1.5% for an average winning price of US$4,127 a tonne. Whole milk powder prices advanced 2.2% to US$3,741/tonne.
Reporting by Paul McBeth. Image from Vitaly Gariev on Unsplash.
