NZD: NZD/USD - Drifts Lower As PBOC Pushes Back

The NZD/USD had a range of 0.5686 - 0.5710 in the Asia-Pac session, going into the London open trading around 0.5695, -0.25%. The NZD has slipped lower and remained under pressure for most of our session. While price remains below the 0.5800/50 area I suspect rallies continue to be faded looking for a potential move back towards the 0.5500/0.5600 area. NZD continues to stand out as a short against a resurgent USD but it is worth noting that because of the size of the market the market can very quickly become all positioned the same way, so I think the USD will need to break above its pivotal resistance for the NZD to test those lows. That being said, a poor unemployment print tomorrow in New Zealand would certainly give it another nudge.

• MNI AU - Significantly Weaker Jobs Data Could Increase Easing Expectations: Q3 jobs and wages data are released Wednesday and with spare capacity an important driver of monetary easing, will be monitored closely as there has been excess supply in the labour market. Monthly data in the quarter signal there was a stabilization but employment is likely to have remained soft. The unemployment rate is expected to rise 0.1pp to 5.3%, in line with the RBNZ’s August projections. A 25bp cut on 26 November is generally expected but if the labour data print significantly weaker, then expectations of 50bp may increase.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5650(NZD1.1b Nov 5), 0.5675(NZD1.05b Nov 5), 0.5750(NZD604m Nov 5) - BBG

Fig 1: NZD/USD Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZGBs closed little changed across benchmarks after a subdued session.

• Tomorrow sees the key event of the week’s calendar with the release of Q3 labour market and wages data.
• Filled jobs for the quarter signal a stabilisation, but employment is likely to have remained weak, with consensus forecasting it to rise only 0.1% q/q to be still down 0.2% y/y. The unemployment rate is expected to rise 0.1pp to 5.3%, in line with the RBNZ's August projections. Soft labour demand is likely to weigh on private wage growth, which is forecast to rise around 0.4% q/q after 0.6%.
• Swap rates are little changed. The 2-year rate is holding its recent rise, bouncing off channel support, after reaching extreme overbought conditions. (see chart)
• RBNZ dated OIS pricing is little changed across meetings. 24bps of easing is priced for November, with a cumulative 31bps by February 2026.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 5.00% May-54 bond.

Bloomberg Finance LP

The USD/JPY range today has been 154.06 - 154.48 in the Asia-Pac session, it is currently trading around 154.10, +0.05%. The pair remains well supported thanks to a combination of a hawkish FED and a BOJ that is still unsure about when it will raise rates. We are testing some resistance around the 154/155 area and I would expect we might to do some work around here initially. A sustained break back above 155 could see the move begin to accelerate and with that the potential for a new round of intervention, though personally I think they will wait for levels closer to 160 to get involved. Look for dips to continue to be supported while above 149-150, the first buy zone is back toward the 152.00 area.

• Yen comments by the FinMin today show FX remains a close watch point for the authorities. Still, based on historical remarks, the comments suggest concern, but not yet suggesting intervention is imminent.
• Options : Close significant option expiries for NY cut, based on DTCC data: 152.50($1.42b). Upcoming Close Strikes : 150.00($1.13b Nov 3) - BBG.

Fig 1 : USD/JPY Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P