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AUD/NZD drops on a mixed Aussie jobs report but recovers to NZ GDP data miss levels

  • AUD/NZD recovers from post Nov. jobs data spike to the downside.
  • AUD/NZD has been travelling in a much wider range due to the volatility over the FOMC and NZ GDP. 
  • AUD/NZD bulls eye the 23.6% fibo at 1.0543.

AUD/NZD has been on the march following the NZ GDP data miss, but the Aussie jobs data has stopped the cross in its tracks, stripping the bulls of the baton, if only for a moment.

The Australian labour market report for November was mixed with something for both bears and bulls. The employment chage was a big beat of +37.0K vrs the expected +20.0K, prior +32.8K
Unemployment Rate: 5.1% expected 5.0%, prior 5.0%. The Full-Time Employment Change: -6.4K  vs prior of-9.5K with a participation rate of 65.7% vs the expected 65.6% and prior 65.6%.

As far as the latest data from New Zealand, GDP arrived as 0.3% q/q in Q3. This is a poor result considering Q2’s strong 1.0% q/q print and vs the expectations of 0.6% and 1.0% in Q2.  For the y/y, up 2.6% expected 2.8% y/y, prior 3.2%, revised up from 2.8%. The RBNZ had a forecast well off the mark at 0.7% growth for Q3 which will lend support for a lower bird on interest rate differentials. "We expect growth can continue to muddle along at an annual pace of 2½-3%, as a number of economic headwinds and tailwinds play out. This would be a touch shy of where we see trend growth, suggesting it will be a struggle for core inflation to lift sustainably to the RBNZ’s 2% target," analysts at ANZ Bank argued. 

FOMC outcome (Westpac analysts summary):

The Fed hiked as expected, to 2.25-2.50%. The FOMC stuck to the "gradual" pledge, albeit watered down, adding the caveat for "some" further gradual increases. It repeated that the risks are roughly balanced but added a new line that they are monitoring “global economic and financial developments”, a nod to recent developments and explicitly flagging that they could alter their risk assessment for the economy.

The “dots” also showed dovish migration, the 2019 median funds rate projection now at 2 hikes, down from 3, while the median long run rate is now 2.75%, a full hike lower than in September. 2019 GDP and inflation were trimmed too; growth next year now seen at 2.4%, from 2.5%, core inflation now seen at 2% from 2.1%. All told, the FOMC delivered the dovish hike that was universally expected, though potentially not enough for interest rate markets, which seemed to be expecting a clear indication of a pause in tightening.

GDP forecasts:

2018 3.0% vs 3.1%
2019 2.3% vs 2.5% prior
2020 2.0% vs 1.8% prior

2018 1.9% vs 2.0% prior
2019 2.0 vs 2.1% prior
2020 2.0% vs 2.1% prior

AUD/NZD levels

Bulls remain in control, looking for a break of the 1.05 figure opens a run to test the 23.6% Fibo of the late Oct highs and recently posted lows. Above there leaves scope for a test of the 21-D SMA located at 1.0575. Bulls need a break to 50% of the aforementioned range, while otherwise, the price is subject to a re-run of the recent lows guarding S2 at 1.0412 and S3 1.0366.

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