New Zealand unemployment data beats expectations, NZZ rallies .07$

• New Zealand jobs data comes to the fore and NZD rallies 0.7%.
• Unemployment data beats expectations, lower by 3.9% vs 4.3%  
• NZD/USD also solid on dollar weakness as well as US yields dropping heavily. 

The New Zealand labour market data suite has been released as a temporary driver against a backdrop of major risk-off sentiment due to a re-set of trade wars between the US and China. This data comes ahead of inflation expectations later today, the Reserve Bank of Australia's interest rate decision and tomorrow's Reserve Bank of New Zealand.

The data arrived as follows:

• Unemployment rate Q2 3.9% (est 4.3%; prev 4.2%).
• Employment change (QoQ) A2 0.8% (est 0.3%; prev -0.2%) /  (YoY) q2 1.7% (est 1.2%; prev 1.5%).
• Average hourly earnings (QoQ) q2 1.1% (est 0.5%; prev 1.1%).       
• Participation rate Q2 70.4% (est 70..4%; prev 70.4%).
• Private wages inc. overtime (QoQ) q2 0.8% (est 0.7%; prev 0.3%).
• Private wages ex. overtime (QoQ) q2 0.8% (est 0.7%; prev 0.3%).

About the Employment Change 

The Employment Change released by the Statistics New Zealand is a measure of the change in the number of employed people in New Zealand. Generally speaking, a rise in this indicator has positive implications for consumer spending which stimulates economic growth. A high reading is seen as positive (or bullish) for the NZ dollar, while a low reading is seen as negative (or bearish).

RBNZ in focus:

Meanwhile, the Kiwi made a modest recovery despite dampened market sentiment due to a weaker Dollar and lower US yields as global equities drop." The reaction in global markets related to the CNY fix and a re-set in trade wars has been dramatic, with sharp falls all over the shop with volatility expected to persist - Indeed, the RBNZ is expected to cut rates tomorrow despite this data beat. "The escalation in trade tensions will hit both the US Chinese economies hard, and cause collateral damage across Asia in particular. Global commodity markets are coming under increasing pressure and New Zealand’s commodities are unlikely to escape scot-free," analysts at ANZ argued:

And there are other channels through which the New Zealand economy will be affected, potentially quite rapidly:

• Businesses’ confidence to invest and employ. This has been surprisingly low for some time relative to the rest of the domestic data-flow and we suspect that global risks are playing a large part in this.
• The weaker yuan reduces the ability of China to pay top dollar for our commodities. And it may well have quite a bit further to go, depending on the appetite of China’s authorities to let it move.
• The lower yuan will also export deflationary pressure via cheaper imports.