The day’s not over yet but the comdolls have already seen a lot of action! Here are two economic events that pushed the Aussie and the Kiwi in different directions.
1. RBNZ Monetary Policy Statement
The report: The Reserve Bank of New Zealand (RBNZ) kept its interest rate steady at 2.50% in December. What caught the investors’ attention though is that the central bank is hinting at interest rate as early as the second half of 2014 in order to keep inflation around the 2% target.
Last October RBNZ Governor Graeme Wheeler had introduced limits on mortgage lending to control the booming house prices. Unlike other major central banks, the RBNZ has also been relatively passive in controlling their local currency’s strength. Apparently, they were counting on NZD strength to curb export demand. But with inflation projections uncomfortably high, it won’t be long before the RBNZ uses the rate hike card.
The reaction: NZD/USD jumped by 40 pips in the first 15 minutes of the release. And while it did retrace in the early Asian session, the pair is currently trading around 60 pips above its open price.
2. Australia’s Employment Reports
The report: Employment numbers from the Land Down Under mostly came in as investors had expected. The unemployment rate edged higher from 5.7% to 5.8% while the participation rate was unchanged at 64.8% in November.
What’s surprising about the report was that it showed 21,000 new jobs in November, twice the expected 10,300 figure. Full employment contributed 15,500 to the mix part-time employment also clocked in an additional 5,500 jobs.
The reaction: AUD/USD also spiked higher after the report’s release. Unfortunately, market players weren’t able to sustain the move as they believe that the upside surprise in the report isn’t likely to change the RBA’s grim labor market estimates.
Unlike NZD/USD, the Aussie FELL by 50 pips in the first 30 minutes of the release. Heck, it even dropped to .9010 before bargain hunters stepped in and pushed the comdoll higher during the early London session.
Looking at AUD/NZD, we can see that the pair took hits when each of the reports was released. After all, both reports highlighted the divergence in the RBA and RBNZ’s short-term policy stances. Does this mean that the Kiwi is a better bet than the Aussie in the near future?