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– The NZD market is ahead of the crucial data on unemployment and wages
– The ANZ Business Confidence Index records a sixth consecutive decline.
© Adobe Stock The New Zealand dollar was stomped on Tuesday after data revealed a sixth consecutive monthly drop in business confidence in July and traders took a stand before the latest labor market statistics, 23:45 London time.
Markets are looking to increase employment in New Zealand by 0.4% in the second quarter, compared to 0.6% at the beginning of the year, which, according to consensus forecasts, will be enough to keep the unemployment rate stable at 4.4% for the period. According to a consensus, the labor cost index would have increased by 0.6% in the second quarter, up from the 0.3% growth observed previously, which would have increased the annualized Kiwi wage growth rate of 2.1%
. The Labor-led coalition government implemented the first of the anticipated increases in the minimum wage in April, an improvement in the number of salaries seems to be a credible prospect on Tuesday.
"We believe that the unemployment rate in New Zealand increased from 4.4% in the first quarter to 4.5% in the second quarter, but annual growth in the labor cost index probably increased slightly, to 1.8%, "says Paul Dales, economist at Capital Economics.
The minimum wage is expected to rise from $ 15.75 hourly last year at $ 20 per hour in 2020, which will decline every year.A sharp rise in the labor cost index on Tuesday would be sure to d & # 39; light a fire under the New Zealand dollar, even if it's only for a short period of time
., Kiwi interest rates and the dollar in recent times.However, any increase does not would hardly be the result of pressure on organic wages, so the markets might find that any further boost to the Kiwi vanishes quickly. [19659004] "Labor market figures should show a relatively tight labor market and higher wage inflation, largely due to increases in the minimum wage, which should boost the" When will the RBNZ raise rates? "Daniel Been, Head of FX Research at Australia & New Zealand Banking Group." Our medium-term outlook has not changed, so we would use force to get short positions. "
[19659004] Above: NZD / USD rate displayed at daily intervals
The NZD / USD rate was lowered from 0.20% to 0.6810 around the London close Tuesday as the New Zealand-Pound rate was up 0.04% to 1.9256
[19659006] Above: Dollar-to-dollar rate New Zealand every day.
Kiwi business confidence marks its sixth consecutive decline
The index of business confidence in Australia and New Zealand (ANZ) recorded its sixth consecutive monthly decline Tuesday, falling to -44.9 in July -39.0 in June.
This means that the index has di minuted each month that an investigation was published this year, the barometer having been published for the first time in 2018 in February, at -19, up from -37.8 observed in December.
"Business perceptions of their own prospects are a better indicator of economic performance, but the news has not been optimistic either: they have dropped 5 points to reach a net of 4%." Waiting for improvement. and well below the +27 long-term average, "says Sharon Zollner, chief economist at Australia & New Zealand Banking Group. "By industry, retailers remain the least positive about their own business (-4%) despite consumer confidence still robust."
The ANZ Trust Survey asks about 1,500 companies in the manufacturing, construction, distribution, agriculture and services industries. evaluate their own prospects for a period of 12 months, as well as their own perspectives in relation to their perceptions of how others are doing. Responses are combined to produce an index.
One of the likely reasons for the decline in business confidence, which seems to have been led by retailers, could be that the Labor Party-led coalition government implemented the first of the anticipated increases minimum wage in April. According to government policy, the minimum wage is expected to rise from $ 15.75 per hour last year to $ 20 per hour in 2020, which will affect all businesses paying low wages, in retailers, given the extent to which they are normally dependent on a cheap labor force.
Markets are concerned about business confidence data because companies react quickly to changing economic conditions, so that a rise or fall in confidence can give investors and traders an early focus on the pace of economic activity during a given period. The composite indicator of GDP growth combines data from business confidence data with data from similar consumer surveys. According to Zollner, the indicator still indicates growth in the New Zealand economy, but only because of consumer and household confidence.
"This economy is feeling more and more late in the cycle: Fiscal stimuli and still robust terms of trade will support growth, but still weak business confidence increases the risk that companies will delay investment and hiring decisions. self-fulfilling prophecy, "writes Zollner, in a note to clients on Tuesday.
RBNZ weighs on New Zealand dollar
Markets care about global activity and demand in an economy because ############################################################################################ 39, it has a direct influence on inflation. questions around interest rates. Changes in interest rates, or their allusions, are only made in response to fluctuations in inflation but to currency of impact because of the positive influence that it has. They exert influence on international capital flows and their attractiveness for short-term speculators.
The Reserve Bank of New Zealand kept its interest rate at a record low of 1.75% since the end of 2016, citing sub-target inflation, low wage growth and prospects difficult for the economy. The consensus is that the central bank is maintaining its rates up to a certain point in the second half of 2019.
Kiwi inflation remained below the midpoint of the 1% to 3% target % since 2012, helped by the combined effects of low wage growth and high household debt, which have reduced the ability of consumers to increase their spending.
At a time when the central banks of the United States, Canada, the United Kingdom and elsewhere are raising their interest rates, has encouraged investors to sell the neo-dollar. Zealand in favor of the purchase of books, US dollars and other currencies
As a result, the New Zealand dollar lost 5.19% against the US dollar in 2018 and 2.99% against has fallen further than this in recent months as it had increased by similar measures during the first quarter of the year.
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