The Australian Dollar is on the offensive against the New Zealand Dollar following a stellar jobs report. AUD/NZD could be setting up for further gains ahead of key inflation data next week. Get your market update from ddubrovskyFX here:
stellar jobs report
, which may set the stage for further gains against the New Zealand Dollar. Australia added almost 65k positions versus 60k anticipated. Meanwhile, the unemployment rate fell to 4.2% from 4.6%, the lowest in 13 years. Economists were calling for a decline to 4.5%. Westpac, a key Australian bank, now forecasts the Reserve Bank of Australia to lift rates in August this year versus prior estimates of February 2023. The central bank did mention last year that tapering and ending quantitative easing in May could be on the table given forecasts from November. This may be brought forward if data continue to outperform.
Both the Australian and New Zealand Dollars tend to be sentiment-linked currencies. This helps them to, focusing on RBA and RBNZ policy expectations. On the daily chart below, AUD/NZD can be seen closely tracking spreads between Australian and New Zealand 10-year government bond yield spreads. With that in mind, all eyes ahead are on Australian and New Zealand CPI data next week. The Citi Economic Surprise Index tracking Australia continues to climb deeper into positive territory, suggesting markets may be understating the health and vigor of the country’s economy.
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