The New Zealand dollar eased to around $0.599 on Wednesday, snapping a three-day winning streak, as investors digested mixed signals from the country’s latest labor market report.
Kiwi dollar drifts lower
While the unemployment rate remained unchanged at 5.1% in the first quarter—slightly better than the expected 5.3%—the details of the report highlighted persistent underlying weakness in the job market. Employment edged up just 0.1%, in line with forecasts, but wage growth decelerated more sharply than anticipated, with private sector hourly earnings rising at their slowest pace in over two years. The participation rate also dipped slightly, suggesting some labor force withdrawal and hinting at structural softness in the employment landscape.
These figures reinforced expectations that the Reserve Bank of New Zealand will shift to a more accommodative stance. Markets are currently pricing in a 25-basis-point rate cut at the central bank’s upcoming meeting later this month, with at least two more reductions anticipated by year-end amid signs that economic momentum continues to cool. Policymakers are increasingly concerned about sluggish domestic demand, soft housing activity, and a drop in consumer confidence, all of which could weigh further on employment and inflation prospects.
Pressure offset by trade war positive news
Nevertheless, downside pressure on the Kiwi dollar was partially offset by growing optimism over international trade conditions. Hopes for a breakthrough in US-China relations lent support to risk-sensitive currencies, including the NZD. Officials from both countries are scheduled to meet in Switzerland later this week to rekindle trade negotiations, after months of escalating tariffs and retaliatory measures. The talks are seen as a crucial step toward resolving tensions that have disrupted global supply chains and dampened sentiment in export-driven economies like New Zealand’s.
Elsewhere, broader movements in the US dollar and commodity markets also influenced NZD performance. A softer greenback, driven by dovish expectations for the Federal Reserve’s policy outlook and political pressure on rate policy from the White House, helped cushion losses in the Kiwi. Additionally, stabilization in global dairy prices—New Zealand’s top export—offered some fundamental support for the currency, though analysts note that a meaningful rebound in export revenue is needed to shift the RBNZ’s outlook more decisively.
Looking ahead, traders will be closely watching the RBNZ’s monetary policy statement for updated guidance, as well as the outcome of trade discussions in Europe. Any hawkish surprises or signs of progress on the trade front could limit further downside in the NZD, although persistent labor market weakness and dovish central bank expectations remain a key drag.
