New Zealand’s unemployment rate rose to 5.3% in the third quarter, up from 5.2% in the previous quarter. This matches market expectations. Employment growth remained unchanged at 0%, following a slight drop of 0.1% in the second quarter. Additionally, the participation rate decreased to 70.3% from 70.5%. As a result of the employment data, the NZD/USD pair fell by 1.09%, now trading at 0.5648. The state of the labor market affects the value of the currency, which, in turn, influences consumer spending and economic growth. Wage growth is key to economic policy because it impacts consumer spending and inflation. Central banks study wage growth to guide their monetary policy. When wages rise consistently, it can fuel underlying inflation. Different central banks prioritize employment levels based on their goals. However, labor market conditions are vital indicators of economic health and impact inflation, regardless of the central banks’ specific mandates. The Q3 unemployment data released today, November 5th, 2025, indicates a cooling labor market in New Zealand. The unemployment rate met expectations at 5.3%, but the job growth of 0% was weaker than expected. This suggests that high-interest rates are now putting pressure on the economy. This data gives the Reserve Bank of New Zealand (RBNZ) more reason to consider a more cautious approach. We believe the market may start anticipating a higher chance of an interest rate cut in the first half of 2026. This marks a significant change from the aggressive rate hikes seen throughout 2024 to control inflation. Recent data supports this weakening trend, making a bearish outlook more likely. Last month’s Consumer Price Index (CPI) data showed annual inflation dropped to 3.1%, down sharply from its peak and getting closer to the RBNZ’s target range. Moreover, the October 2025 ANZ Business Outlook survey revealed that business confidence hit its lowest level in over a year, signaling that companies are bracing for a slowdown. For derivative traders, this outlook suggests positioning for further weakness in the NZD/USD pair, which is already trading below 0.5650 today. We might consider buying put options on the NZD/USD to capitalize on a continued decline while managing our risk. Shorting NZD/USD futures offers a more straightforward way to profit as it approaches the 2024 lows near the 0.5500 level. There are also opportunities in currency crosses, especially with a short NZD/AUD position. Australia’s recent employment report from October 2025 showed its unemployment rate steady at 4.1%, highlighting a clear policy difference with New Zealand. This trade exposes the specific weakness in the Kiwi economy. Looking back, this situation resembles the economic slowdown of 2017, where a weakening labor market led to a period of NZD underperformance as the RBNZ adjusted its policy. We expect a similar trend may emerge in the coming weeks as markets fully absorb today’s data, reinforcing our bearish outlook on the New Zealand dollar.

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