NZD/USD Lifted by Record NZ Wage Growth


NZD/USD Analysis

The Reserve Bank of New Zealand had surprised markets in April, with its decision to increase interest rates by another 50 basis points to 5.25%, against expectation for a smaller move. Policymakers took this aggressive action, because Inflation is "still too high and persistent" and employment "beyond its maximum sustainable level". [1]

Since then, the Consumer Price Index (CPI) moderated to 6.7% y/y in the first quarter and the lowest level in more than a year, but remains close to its three-decade highs (7.3%). Today's data showed that the unemployment rate steadied at 3.4%, not far from the historic lows (3.2%). More to it, wage inflation as measured by the Labor Cost Index (LCI) continued to rise. It printed 4.3% y/y in Q1, which is the biggest increase since the data started in 1992. [2]

Policymakers had refrained from offering explicit forward guidance back in April, contrary to hints for further tightening in previous meeting, but February's projections point to additional tightening of 0.25% to reach the terminal rate [3]. Furthermore, today's data will probably keep pressure on the RBNZ to maintain tight policy setting.

NZD/USD got a lift after the release and extended its gains above the EMA200 and into the daily Ichimokou Cloud. This brings 0.6300-10 into its crosshair (upper border of ICH and descending trend line from the 2023 highs, but we are cautious at this stage for its ability to take it out and look towards 0.6383.

The upside contains many roadblocks though and the Relative Strength Index (RSI) points to oversold conditions. This could create pressure, although a strong catalyst would be required for new 2023 lows (0.6083).

All eyes now turn to today's policy decision by the US Fed, which can spur volatility and will likely determine the trajectory of NZD/USD. Policymakers are in a tough spot, as they have to weigh financial stress and prospect of economic slowdown, against persistent inflation and tight labor market. CME's FedWatch Tool prices in a 0.25% hike, but focus will also be on the Fed's intentions from that point on. [4]

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Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 02 May 2023


Retrieved 02 May 2023


Retrieved 02 May 2023


Retrieved 27 Sep 2023

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