Australia dollar lifted by jobs boom, NZ dollar deflated by GDP

[SYDNEY] The Australian dollar leapt on Thursday following an upbeat job report, whiles its New Zealand counterpart lost some ground after disappointing growth data.

The Australian dollar rose to US$0.7605, from US$0.7588 early, after the local jobless rate fell to four-year lows in May at 5.5 per cent, versus forecasts of 5.7 per cent.

Employment jumped a seasonally adjusted 42,000 in May, handily topping forecasts for a 10,000 gain, while annual jobs growth accelerated to a brisk 2.0 per cent.

"The much stronger than anticipated rise in employment in May and the larger than expected fall in the unemployment rate will go some way to quashing growing talk of the chance of another interest rate cut by the Reserve Bank later this year," said Kate Hickie, an economist at Capital Economics.

Interbank futures widened the odds of a rate cut with the December contract giving an 8 per cent chance of a move, from 14 per cent before the data. Markets are even pricing in a small probability of a tightening by May next year.

Aussie resistance was found at the 2-1/2-month peak of US$0.7636 touched on Wednesday.

The Aussie also reached multi-week highs against the pound and euro. It rallied hard against its New Zealand neighbour, up nearly one per cent to NZ$1.0528, away from a recent four-month trough.

Undermining the New Zealand dollar was a surprisingly soft gross domestic product report. The kiwi dropped to US$0.7210, from US$0.7260 early and a four-month peak of US$0.7320 set on Wednesday.

The economy grew 0.5 per cent in the three months to March, under analysts' forecast of 0.7 per cent and well below the central bank's 0.9 per cent.

On an annual basis, the economy expanded 2.5 per cent in the first quarter of this year versus forecasts of 2.7 per cent.

Still, some economists remain bullish on the local economy.

"Potential growth is quite high in New Zealand with population growth of 2.1 per cent and labour force growth above 5 per cent. So in the grand scheme of things, 2.5 per cent growth is not that bad," said Michael Turner, a strategist at RBC Capital Markets.

For the Reserve Bank of New Zealand, the outcome reinforces the case to keep rates on hold.

"They have rate hikes priced in their profile, but that's way out and today's data is not going to bring that forward," said Mr Turner.

New Zealand government bonds rose, sending yields six basis points lower at the long end of the curve.

Australian government bond futures pared back earlier gains, with the three-year bond contract down one tick at 98.225.

The 10-year contract was up five ticks to 97.6050, while the 20-year contract gained 7.75 ticks to 97.0300.

REUTERS