New Zealand Dollar Drops Sharply After Weak Jobs Numbers

The New Zealand dollar had its
worst day in more than a year after the country’s statistics office released
the employment numbers for the fourth quarter. The numbers showed that the
unemployment rate jumped to 4.3% from the third quarter’s 3.9%. Investors were
expecting the rate to jump slightly to 4.1%.

The participation rate, which
measures the people of working age who are currently working or seeking
employment rose by 70.90%, which was lower than the third quarter’s 71.10% and
the expected 71%.A weaker participation rate is viewed as being bad for the
economy.

The Labor Cost Index, which is a
measure of the change in price businesses pau for labor excluding overtime,
rose by 0.5%. This was lower than the expected 0.6% and unchanged from the
third quarter.

The employment change rose by
0.1%, which was lower than the expected 0.3%. It was also lower than the third
quarter’s 1.1%.

In the past one month, the
country has released mixed data. In January, it reported a surprise increase in
the trade surplus. It also reported an improvement in inflation, which edged
closer to the RBNZ’s target of 2.0%.

Today’s movements appeared to
follow what the neighboring Australian dollar is doing. Yesterday, the Aussie
declined sharply after the bank revealed that it could lower the interest
rates. It caught traders off-guard especially after the interest rates decision
on the previous day. Therefore, investors believe that the RBNZ could also cut
rates or delay the previously announced hike.

The NZD/USD dropped to a low of 0.6748,
which was along the 63.8% Fibonacci Retracement level. At the same time, the
Relative Vigor Index, which is an oscillator that measures volatility fell
sharply. Therefore, while the downward movement will continue, the pair could
also make some short-term upward movements.

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