NZD/USD Forecast: Labour Market Report Weighs on Rate Hike Expectations

New Zealand's unemployment rate has reached its highest level in over a decade, climbing to 5.6% in the June quarter.

The labour market report released by StatsNZ shows that despite stronger-than-expected hiring, the increase in unemployment was due to a sharp lift in labour force participation.

The underutilisation rate, which includes unemployed people and those on the sidelines available for work, also climbed to 13.8% from 12.9%, suggesting abundant labour market slack that leaves little risk of a wage breakout.

The report's data has reinforced the view that the Reserve Bank of New Zealand (RBNZ) will likely deliver another 25 basis point rate increase at its next meeting, but casts doubt on how far rates will ultimately need to move beyond neutral.