NZD/USD softens below 0.6050 as New Zealand labor data dampens RBNZ rate hike bets

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The NZD/USD pair trades in negative territory near 0.6040 during the early Asian trading hours on Wednesday. The New Zealand Dollar (NZD) edges lower against the US Dollar (USD) as softer labor data push out expectations for the Reserve Bank of New Zealand (RBNZ) tightening.

NZD/USD drifts lower to around 0.6040 in Wednesday’s early Asian session.
Softer New Zealand labor market data has led markets to push back expectations for further RBNZ rate hikes to later in 2026.
The US UoM Consumer Sentiment Index improves to 57.3 in February, stronger than expected.

New Zealand's Unemployment Rate climbed to 5.4% in the fourth quarter (Q4) of 2025, the highest since 2015. This figure came in worse than the estimations of 5.3%. This report dampened expectations for any near-term tightening by the RBNZ, which weighed on the Kiwi against the USD. Swaps markets are now pricing in over a 60% probability of a rate reduction by the May policy meeting.

Consumer confidence in the US improved slightly in February, with the University of Michigan's Consumer Sentiment Index rising to 57.3 from 56.4 in January. This figure came in above the market consensus of 55, supporting the Greenback and acting as a headwind for the pair.

The delayed release of the US employment report for January will be published later on Wednesday. Markets expect to see 70,000 jobs added to the US economy in January, while the Unemployment Rate is forecast to remain unchanged at 4.4% during the same period. However, any signs of weakening in the US labor market could undermine the USD in the near term.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.