NZ unemployment down to 3.4% – lowest since 2007

Monday was a day of strong purchasing managers surveys. We had very positive data from New Zealand overnight, the unemployment rate fell to 3.4% down from 4.0% in the previous month and the lowest level since 2007’s record low. There was also a 4.3% rise in global dairy trade prices. That can have a very significant impact on New Zealand export income. GBPNZD dropped a cent to NZD 1.9075 in early trade. That will have been helped by a rise in the service sector purchasing managers index from China. Any improvement in China’s business activity is beneficial to the countries that service the region. New Zealand’s number one export market in Australia and Australia’s major export market is China.

Chinese activity lifts AUD and NZD

And whilst we’re Speaking of Australia, the GBPAUD rate also reacted positively to the Chinese data. GBPAUD is down 3/4 of a cent from its overnight highs. This pair starts the day at 1.8285 in spite of a 4.3% drop in Australian building approvals. That was twice as bad as expected.

By way of contrast the Nationwide house price index, published overnight showed UK house prices rising at 9.9% on the year to October. We are expecting improved purchasing managers indices for the service sector and the overall Composite Index this morning. If the data matches expectations we should see some strength in the pound. The pound starts Wednesday at 1.1760 against the Euro and 1.3610 against the US Dollar.

Eurozone unemployment data is due later this morning and we will see some speeches from EU central bankers. There is a good chance the European unemployment rate will drop to 7.4%. The lowest it has been in the last 20 years is 7.1%, so that would be a very good recovery.

USD in stasis ahead of Fed announcements

U.S. dollar volatility has come to a standstill I have this afternoon’s Federal Reserve announcements. The markets are expecting the Fed to make changes to their monetary policy which should reduce the number of bonds they are buying over a period of time but won’t go as far as raising interest rates at this stage. Nonetheless, there is every chance the US dollar will strengthen in later trade if the Fed meets market expectations. GBPUSD is bumbling along at the bottom end of its range. That starts the day at $1.3610 but there are clearly GBP buyers ready to move in at $1.36 and anything below there. So we could see a muted response in this pair.

The EURUSD rate is virtually lifeless; $1.1585 is where we find this pair this morning and the chart pattern for the last 24 hours would be of huge concern to doctors if it was an ECG. We suspect life will return to the GBPUSD rate later in the day because the Federal Reserve isn’t the only news story from the US. We will also see a slew of purchasing managers indices, durable goods orders, factory orders, crude oil inventories, and a number of other less influential data releases. Hang on tight.

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Now, be honest, how many of those have you used and hated yourself for doing so?

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