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US Jobs Data in Focus

Published July 5, 2019

The Kiwi drifted lower overnight in subdued markets with the US closed for 4th July, Independence Day  and ahead of tonight’s key US jobs report.

US Jobs Data Eyed

Focus turns to tonight’s US non-farm payrolls with markets forecasting 160k new jobs to be added in June, unemployment to remain at a low 3.6% and wage inflation to increase 3.2% year-on-year. The report follows the private jobs data released on Wednesday night which missed forecasts and could create further upside for the NZD should numbers disappoint.

Retail Sales Disappoint in Australia and Europe

Australian retail sales disappointed again in May, with the Australian Bureau of Statistics (ABS) reporting sales only rose a dismal 0.1% and missed forecasts of a 0.2% gain. The weak reading was led by a downturn in household consumption as miserly wage growth and declining home prices cut into spending. Markets are now pricing a near 90% chance of a third rate cut to 0.75% by year end.

European retail sales also disappointed with year-on-year sales only increasing 1.3% vs expectations of 1.6%.

US-China Trade Talks to Resume

White House Economic Adviser Larry Kudlow has advised trade talks will resume next week, as the US and China try to resolve a year-long trade dispute. It’s still unclear when exactly the face-to-face talks will begin between top trade negotiators US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and China’s Vice Premier Liu He. But Ludlow announced talks would “begin soon” and an announcement will be forthcoming.

Falling Bond Yields Weigh on Kiwi

US Government bonds held near multi-year lows along with the US 10-year Treasury notes hitting their lowest level since November 2016, as markets increase bets on the US Federal Reserve cutting interest rates later this month and other major central banks joining in on looser monetary policy. German 10-year Bund yields hit a record low of 0.4% and matched the European Central Bank’s deposit rate for the first time, indicating markets are expecting rate cuts after EU leaders agreed to appoint Christine Lagarde as the ECB’s new president. Lagarde is widely expected to continue the dovish stance of current ECB President Mario Draghi. Global stocks surged to 18-month highs and saw the NZD fall below the .6700 levels.