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New Zealand dollar slumps despite strong Q2 jobs and wage growth

Brown Brothers Harriman says the NZD and local yields fell as higher labor supply and unemployment offset the Q2 employment and wage gains, even as it sees scope for additional RBNZ tightening.

Reported · Written up by our desk · Major Pairs

Brown Brothers Harriman’s Elias Haddad said the New Zealand dollar and local yields slumped after strong Q2 employment and wage data, with the gains being countered by signs of ongoing labor market slack.

BBH pointed to employment rising 0.5% quarter over quarter versus 0.1% in Q1, and private regular wages up 0.7% quarter over quarter versus 0.5% in Q1. The firm said this still came with higher unemployment and a larger labor supply.

Despite the near term soft reaction, Haddad argued NZD could keep edging higher against most major currencies, supported by above target inflation, a relatively favorable domestic growth outlook, and expectations that the Reserve Bank of New Zealand will deliver further rate hikes.

BBH also framed the policy-rate backdrop as supportive, noting the RBNZ rate is near the lower end of its neutral range, cited as 2.20% to 4.10%.

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