The New Zealand dollar was on fire during the Asian session as the employment report surprised massively to the upside, FXStreet reported. In the fourth quarter, the unemployment rate eased to 5.3%, beating market expectations of 6.1%, as fewer people looked for work leading to a decline in the size of the labor force. The participation rate fell to 68.4% from an upwardly revised figure of 68.7% in the previous quarter. From one standpoint, even though this good news should be welcomed by the RBNZ, the effects of a tighter job market will take time to translate into wage growth. It therefore raises the question of further support from the Reserve Bank as inflation fell to 0.1% y/y in the fourth quarter. According to Governor Wheeler, the current weak level of headline inflation is mostly due to negative inflation in the tradables sector as well as the sharp decline in oil prices, adding that core inflation is well within the target band and that the central bank’s main objective is to anchor inflation expectations.
