Australian dollar recovers on upbeat jobs data, kiwi nurses losses

SYDNEY: The Australian dollar regained some ground on Thursday after upbeat jobs data narrowed the odds of another rate rise, while its New Zealand peer came under pressure as expectations for an early hike diminished.

The Aussie bounced 0.4% to $0.7068, recovering after a 0.6% decline overnight as the greenback rallied.

Key support levels are $0.7028 and $0.6897, with resistance at $0.7097 and $0.7146.

The jobs data revealed that unemployment unexpectedly remained at 4.1% in January, below analysts’ forecast of 4.2%.

Total employment increased by 17,800 following a significant jump the previous month, while full-time jobs rose strongly by 50,500.

Markets reacted by nudging up the probability of a May increase in the 3.85% cash rate to 80%, up from 70% previously, while a rise to 4.10% was now fully priced in by August.

The Reserve Bank of Australia cited a tight labour market as one reason why it lifted rates by a quarter point earlier this month, and there is yet no sign of any loosening in the market.

“The past couple of months of data show a trend decline in the unemployment rate, bringing it more into line with other indicators that show some ongoing capacity pressures,” said Taylor Nugent, a senior economist at NAB.

“We expect the RBA to hike in May, noting that the risk skews to an additional hike or a longer period of rates on hold relative to our baseline forecast.”

The kiwi dollar held at $0.5972, after sliding 1.4% overnight. Chart support is at $0.5929 and a breach would be bearish on a technical view.

The currency tumbled on Wednesday when the Reserve Bank of New Zealand said that policy would remain accommodative for some time, surprising investors who had wagered on a significantly more hawkish rate outlook. Markets implied a 40% chance of a hike in the 2.25% cash rate by September, down from 68% ahead of the comments. October had now shifted to 68%, from 100% previously.

“We see a risk of further slippages in the labour market that could see the RBNZ having to keep policy more accommodative,” said Faraz Syed, an economist at Citi.

“So despite the dovish push-back against market pricing, we still remain even more dovish and believe that the RBNZ will not hike this year.”