The New Zealand dollar may finish the week lower against the greenback after better-than-expected US jobs data stoked bets growth in the world's biggest economy is building momentum. It may gain against its trans-Tasman counterpart as the employment situation in Australia dims.
The New Zealand dollar recently traded at 81.69 US cents from 81.60 cents at 8am in Wellington. That's right in the middle of this week's forecast trading range of between 80.40 US cents and 83 cents, according to a BusinessDesk survey of five analysts.
All five of the analysts predict the kiwi will finish the week lower.
Friday's US unemployment rate was significantly better than expected, helping boost equities and risky currencies. The effects were short-lived, with Wall Street's Standard & Poor's index falling 0.3 per cent. The US jobless rate fell to 7.8 per cent last month, the lowest level since January 2009, according to Labor Department data. Payrolls increased by 114,000 workers.
Markets will get more of a feel about the shape of the latest round of quantitative easing on Wednesday when the Federal Reserve's Beige Book is released. The central bank's Beige Book of regional economic activity from the 12 Fed districts is designed to provide anecdotal evidence of the world's largest economy.
"It does look like the kiwi is breaking down slowly and momentum is pointing lower," said Imre Speizer, market strategist at Westpac Banking Corp.
Australia, New Zealand's largest trading partner, will release its jobless rate on Thursday. A survey of 20 Reuters economist predicts it rose to 5.3 per cent from 5.1 per cent, with the participation rate unchanged at 65 per cent.
"The biggest effect on the New Zealand dollar at the moment is the weaker Australian dollar as the markets enthusiastically price in further RBA cuts," said Peter Cavanaugh, senior client adviser at Bancorp Treasury. "There are strong hints there is more to come and the market is expecting it."
Last week, the Reserve Bank of Australia cuts its key interest rate by a quarter of a point to 3.25 per cent, citing weaker commodity prices in a global market where the outlook for economic growth "has softened".
The New Zealand dollar recently traded at 80.35 Australian cents little changed from 80.30 cents at 8am. It climbed above 80 Australian cents last week after the RBA cut eroded the favourable interest rate differential across the Tasman. The yield on Australia's benchmark 10-year government bond was recently at 3.095 per cent compared to a 3.545 per cent yield on New Zealand's equivalent.
In Europe, finance ministers meet tomorrow in Luxembourg where the agenda will be dominated by Spain's economic reforms and Mediterranean nation's reluctance to formally ask for a financial bailout. Spain would be the first European nation to participate in the European Central Bank's bond-buying programme.
"Spanish pride is on the line," Cavanaugh said. "It is a game of brinkmanship - they don't want to be pushed into it."
Ministers from the wider European Union meet on Wednesday.
Germany's estimated inflation figures for September are released on Friday. It is expected to show zero growth in consumer prices, month-on-month, and an annual 2 per cent increase in the consumer price index.
The New Zealand dollar fell to 62.76 euro cents from 62.65 cents at 8am.
Out today in Asia is Japan's trade balance and current account figures for August. On Thursday, China reports new yuan loans for September and Australia's employment data is also out on Thursday.
There is no significant New Zealand data set for release until Tuesday's New Zealand Institute of Economic Research quarterly survey of business opinion, QV monthly house prices and electronic card transactions from Statistics New Zealand. That's followed by the accommodation survey for August on Thursday and the food price index for September on Thursday.
ANZ-Roy Morgan Consumer Confidence and Bank of New Zealand performance manufacturing index are set for release on Thursday.