"The labor market will be crucial for judging the economy and the path of monetary policy. A fall in the jobless rate "would certainly fit with the many other indications of a tightening jobs market."
- Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada
Last week the RBNZ refrained from raising its key refinancing rate, citing the necessity to monitor economic indicators in the coming months. At the same time, stronger inflationary pressure and the hike of the interest rates that would accompany them will definitely send the kiwi higher, reducing the competitiveness of the nation's exports and import substitution industries.
This week's report, however, supports the case of the upcoming rate hike, as situation in the labour market improved significantly in the final quarter. According to Statistics New Zealand the number of employed people rose 1.1%, or the economy added 24,000 jobs from the third quarter. Moreover, the unemployment rate inched lower to 6% compared with 6.2% a quarter earlier, matching the median forecast and hitting the lowest level since 2009. Another indicator, which usually lags in the U.S. economy– the participation rate, climbed to 68.9%, the second-highest reading since records began. Annual wage inflation remained unchanged at 1.6%.
Following the report the kiwi rocketed 2.12% versus its American counterpart to 0.8248, adding to a 1.67% gain a day earlier. New Zealand currency was projected to become one of the biggest gainers this year, and even despite not very impressive performance in January, the outlook still remains bullish.
© Dukascopy Bank SA