Early in Asia, we kicked off proceedings with an RBNZ 25 basis-point rate hike. Not only did the RBNZ raise rates, it also said it expects rates to rise by around 2% over the next couple of years. Over the next year it expects rates to go up by 125 basis points, while the market was looking for a 111 basis-point hike. This was slightly more hawkish than what the market was expecting and therefore resulted in quite a move in the NZD.
In the developed world, the RBNZ is the first central bank to hike and this is its first change in rates since March 2011. AUD/NZD dropped from a high of around 1.065 all the way down to 1.054 on the announcement. This was the pair’s lowest level since January 25 and saw the pair come pretty close to the lowest for the pair since December 2005.
Support levels hold
However, we have since seen a strong bounce in the pair, with the local jobs numbers release driving the pair off its lows. The local unemployment rate remained steady at 6% as expected, while the number of jobs added jumped a whopping 47,300. Approximately 80,500 full-time jobs were added, while 33,300 part-time jobs were lost.
To be fair the market was quite pessimistic about local jobs after recent comments by the RBA. Having said that, the AUD reversed quite sharply and was bid higher against the USD and NZD. AUD/NZD jumped to 1.0618, but has since retreated back below 1.06. Meanwhile, AUD/USD is back above 0.90 and has managed to spike to a high of 0.9076 after finding support at 0.894 yesterday.
Focus now switches to China’s industrial production later today, which is expected to show a 9.5% rise. Any disappointment in this reading will only compound China fears and could be detrimental to risk heading into the end of the week. Apart from China industrial production we also have fixed asset investment and retail sales data.