Market pricing shifted from a 50 per cent chance of a rate cut to a 70 per cent chance after data yesterday showed the seasonally adjusted unemployment rate rose to 4.2 per cent in the three months ended Sepember 30, from 3.9 per cent in the June quarter.
Since yesterday's unemployment data "the market has been increasing the bets on an interest rate cut next week," said Martin Rudings, a senior dealer at OMF.
The market had been largely split on whether or not the central bank would cut rates by 25 basis points to a record low 0.75 per cent. Now "the consensus is they will go," he said.
"Our view is it will be the path of least regret for the RBNZ and the employment numbers just shift the needle towards a cut," said Rudings.
He also noted the RBNZ can't be accused of "over-doing things when all they are going to do is drop the rate to the same as Australia."
Rudings also said the kiwi continues to be weighed by news that an interim trade deal between the US and China might be delayed until December.
"The market got a bit upset by that. It's pretty messy out there," he said.
If the kiwi were to break 63.30 US cents, it might head back down toward 62.10 cents. "The kiwi is in a bit of trouble going into a rate cut next week," he said.
The kiwi was trading at 92.43 Australian cents from 92.54, at 49.42 British pence from 49.55, at 57.31 euro cents from 57.51, at 68.96 yen from 69.33 and at 4.4533 Chinese yuan from 4.4549.
The two-year swap rate was at a bid price of 1.0203 per cent from 1.0385 per cent yesterday while 10-year swaps were at 1.4550 per cent from 1.5025 per cent.
