By Wayne Cole
SYDNEY, May 3 (Reuters) - The New Zealand dollar hopped
to two-week highs on Wednesday as upbeat jobs data only added to
the case for a further increase in interest rates, while the
Australian dollar struggles with another bout of global risk
aversion.
The kiwi climbed 0.6% to $0.6243 , after adding 0.7%
overnight to break resistance around $0.6225. The Aussie lagged
at $0.6674 , after failing to sustain a rally to $0.6717
overnight.
New Zealand data showed unemployment stayed low at 3.4% in
the first quarter, while jobs growth of 0.8% was double market
forecasts.
Wage growth also kept strong, underlining the tough task
facing the Reserve Bank of New Zealand (RBNZ) in its battle to
curb inflation.
"There's plenty of heat emanating out of the labour market,"
said Jarrod Kerr, chief economist at Kiwibank. "Further wage
gains are likely because the cost-of-living crisis is fuelling
wage negotiations."
"The heat is expected to start coming out in the second half
of 2023 - it has to, for inflation to retreat," he added. "The
RBNZ-engineered recession, which is upon us, is likely to cause
a lift in unemployment into 2024."
Two-year swap rates jumped 8 basis points to a
two-week high of 5.135% on the report.
The RBNZ has already lifted rates by a thumping 500 basis
points to 5.25%, and markets are almost fully priced for a move
to 5.5% at the next policy meeting on May 24. Australian data was more restrained, with retail sales up a
modest 0.4% in March, leaving real sales well in the red for the
first quarter, given the still fast pace of inflation.
The slowdown is much desired by the Reserve Bank of
Australia (RBA) which wrongfooted markets this week by hiking
rates a further quarter point to 3.85% and warned yet more might
be needed to bring inflation to heel.
A resulting sell-off in futures implies a one-in-three
chance that rates could reach 4.1% before peaking. "We continue to expect the RBA to hike rates to 4.1%, with a
final +25bp rate hike in July following updates on the national
accounts, unit labour costs, and the annual minimum wage
decision," said Andrew Boak, an economist at Goldman Sachs.
"We view the balance of risks as skewed to a higher terminal
rate over time."
(Reporting by Wayne Cole; Editing by Clarence Fernandez)
Messaging: wayne.cole.thomsonreuters.com@reuters.net))
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