Overnight, we have the last major economic data from New Zealand and Australia for the year. After that, we can expect their pairs to slip into vacation mode for the next couple of weeks.
It seems that the two countries whose currencies usually move in tandem because of their similarity, are seeing a divergence in their economic numbers.
The expectations for later today and early tomorrow reflect this. There’s a consensus that New Zealand data will be worse than before, while Australian data will show an improvement.
Let’s go over what that means for the markets.
New Zealand’s (slow) Economic Growth
We have two bits of data coming out at the same time that routinely affect the currency. However, the one that’s likely to get most of the attention is quarterly GDP.
Expectations are for the economy to have grown by 0.4% in the third quarter, a slowing of the pace from 0.5% prior. On an annualized basis, that would just barely keep the same rate of growth at just 2.1%.
This would, again, be the worst performance since late 2013, with expectations of continuing slowdown in the services sector. Services are generally internally oriented, and depend on the domestic market.
Primary activities, which are a majority for export and depend on the global situation, have been improving. Projections are for them to continue to do so, albeit, not enough to overcome the weakness in the services sector.
There are dueling views on how much the economy has expanded. So, the consensus survey is a bit shaky.
The more optimistic analysts point to the better than expected performance in retail sales. They also point to rising tourism numbers (New Zealand, in part, benefitting from the commotion in Chile, another favorite southern hemisphere destination).
Without a firm consensus, the market isn’t pricing in expectations. Therefore, we could get a stronger reaction than usual if the data comes in a few decimals away from the average.
Australia’s Employment Situation
Last time around, the jobs report from Australia was surprisingly negative. The expectation is that there will be a substantial recovery this time around.
The RBA is increasingly focusing on maintaining job growth as a means of supporting currency stability so the market has a stronger reaction to employment data.
The consensus is for Australia to have added 31.2K jobs during November. This would be a substantial increase from the unusually low -19K during October (which could also be revised higher).
Expectations are for the unemployment rate to stay at 5.3% as a consequence of the increasing participation rate. Despite. or because of, the general weakness in the economy, increasingly more Australians are moving into the workforce.