NZD/USD holds in familiar territory, US dollar mixed

• NZD/USD little changed compared to levels prevailing over employment data.
• Traders look to US Nonfarm Payrolls this Friday followed by US Consumer Price Index on August 10.

At 0.6270, NZD/USD is higher by some 0.34%, rising from a low of 0.6212 to a high of 0.6281. The kiwi has been pushed and pulled following the key second quarter Unemployment data that was released in the prior Asian session. 

''NZ’s Q2 unemployment rate may have come in a little higher than we (or the Reserve Bank of New Zealand) were expecting, but in our view that doesn’t matter for the monetary policy outlook,'' analysts at ANZ Bank said.

''Flat employment growth despite still-high demand for labour suggests the economy has run out of labour resource to keep growing, and with wage inflation running higher than anyone was expecting, these data suggest pipeline domestic Consumer Price Index inflation pressures are far too strong.''

''The risk of a wage-price spiral clearly isn’t any lower despite the small lift in the unemployment rate. In fact, with average hourly earnings growth at 7% YoY (vs CPI inflation at 7.3%), the RBNZ should be very worried about high domestic inflation sticking around long after global inflation (ie tradables) has slowed.''

US dollar mixed

Meanwhile, greenback has dropped from the 109 area down to a recent low of 105.97 over the course of two weeks. Nevertheless, a trio of Fed officials signalled on Tuesday the central bank remains "completely united" on increasing rates to a level that will put a dent in the highest US inflation since the 1980s. This has given the greenback a booster and lifted it to 106.819 over the course of the past few sessions.

San Francisco Fed President Mary Daly said on Wednesday that 50 basis points would be a reasonable thing to do in September. ''We have a lot in the pipeline in tightening but yet to see that in data showing a slowing of the economy, but if we see inflation roaring ahead undauntedly then perhaps 75 be more appropriate.'' US rate futures pared back 75bp view in Sept after Fed's Daly comments. 

Looking ahead, the US Nonfarm Payrolls this Friday followed by Consumer Price Index on August 10 will help to iron out the creases in the greenback. The consensus for Nonfarm Payrolls is 250k. That is down from 372k in June. The Unemployment Rate is expected to fall in at 3.6%.