NZ dollar firms ahead of labour market data, US midterm elections

Wednesday 7th November 2018

The New Zealand dollar strengthened against the US dollar as investors eyed the latest domestic labour market data as well as the US congressional midterm elections.

The kiwi traded at 66.69 US cents at 8.30am in Wellington versus 66.57 US cents late yesterday. The trade-weighted index was at 72.77 from 72.61.

The first results of the closely-watched US mid-term elections, held today, will start arriving this afternoon New Zealand time.

"Prediction markets suggest that the Democrats will win control of the House of Representatives, with the Republicans retaining a slim majority in the Senate," Liam Peach, assistant economist at Capital Economics, said in a note. "We doubt that this outcome would have much impact on the US stock market. Aside from the fact that it is anticipated, a divided Congress would mean legislative gridlock and little prospect of big changes in fiscal policy."

“Admittedly, prediction markets have not had much success in forecasting election outcomes in recent years, including the one in 2016,” Peach added. “But even if the result is not what they are signalling, we doubt that there will be a big reaction.”

First, however, the latest New Zealand labour market data are due this morning, a day ahead of the Reserve Bank’s monetary policy decision and statement.

“New Zealand labour market data today are expected to show the unemployment rate ticking down, with no smoking gun expected in the wage inflation data,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Coming one day ahead of the RBNZ’s MPS, market reaction should be fairly well contained.”

Investors will also keep an eye on the latest data on China’s foreign exchange reserves, due later in the day, Wong added.

“The market will be interested in how much China’s foreign reserves will drop, an indicator of how much intervention the People’s Bank of China did in October,” he said.

The kiwi traded at 92.39 Australian cents from 92.42 Australian cents.

The New Zealand dollar traded at 50.92 British pence from 51.10 British pence Tuesday. It was at 4.6110 Chinese yuan from 4.5885 yuan and traded at 75.59 yen from 75.31 yen. It was at 58.42 euro cents from 58.39 cents Tuesday.

(BusinessDesk)

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