NZD Weakens After Decade-High Unemployment Rate and Market Expectations

The New Zealand Dollar (NZD) weakened against the US Dollar (USD) after the release of the unemployment rate data on Wednesday. The NZD/USD pair lost momentum and dropped to near 0.5875 during the early Asian trading hours, following the employment report that showed a decade-high unemployment rate of 5.6% in the June quarter.

Statistics New Zealand released data showing an increase in the unemployment rate from 5.3% in Q1 to 5.6%, exceeding market consensus of 5.4%. However, the Employment Change rose 0.5% in Q2, up from 0.2% in Q1, and the participation rate jumped to 70.7% in Q2.

Analysts at ING reiterate their preference for a Reserve Bank of New Zealand (RBNZ) move later in the year, noting that markets may be overstating the scale of the tightening cycle. They argue that the RBNZ is likely to hike interest rates in September or October, but not as aggressively as market expectations.