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The New Zealand Dollar entered the penultimate session of the week on the front foot and at the top of the major currency board while the Australian Dollar trailed near the back of the pack, though not quite as far behind as an underperforming Pound and Norwegian Krone.

New Zealand’s Dollar climbed against all currencies in the G20 basket on Thursday following a 2023 budget that some economists have described as likely to be modestly supportive of the economy over the coming years.

“Government spending is forecast to decline as a share of GDP, but the fiscal impulse is expected to move into stimulatory territory over 2023/24 – close to 2% of GDP,” says Mark Smith, a senior economist at ASB.

Smith and colleagues say the budget is unlikely to prevent the Reserve Bank of New Zealand (RBNZ) from raising its cash rate by a further 0.25% to 5.5% this month, in line with earlier forecasts, and that it may mean risk of a larger increase.

Above: AUD/NZD shown at 2-hour intervals with other pairs. Click image for closer inspection.

Thursday’s budget came after the Australian Bureau of Statistics said employment had likely fallen -4.3k when the labour market is measured in seasonally adjusted terms with the unemployment rate ticking higher from 3.5% to 3.7%.

In non-seasonally adjusted terms, employment rose by 24k and the unemployment rate held steady at 3.6%.

The total number of employed people was 13.88 mn in seasonally adjusted terms while without seasonal adjustment the total number of employed people was 13.87 mn with the net difference coming in at 13,864.

“Our Australian economic team note the April retail trade (26 May) and the April monthly CPI indicator (31 May) will be key to watch ahead of the RBA’s 6 June meeting,” says Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia.

Economists and markets tend to focus on seasonally adjusted measures of employment, hence the Australian Dollar reaction on Thursday.

Above: GBP/NZD rate shown at 2- hour intervals alongside GBP/AUD and AUD/NZD.

“Australia is doing a little better than New Zealand on the trade front though. Figures this week showed Aussie export prices unexpectedly lifted by 1.2% in the first quarter, while import prices fell by 4.2%,” says Michael Every, a global strategist at Rabobank.

“Data this week showed the Kiwi trade deficit widened to $16.4bn over the 12 months to March as demand for dairy, proteins and timber products continues to be lacklustre,” Every adds in a Thursday market commentary.

The Pound was an underperformer, meanwhile, amid broad gains for the U.S. Dollar and a mixed performance in stock markets ahead of Treasury Select Committee appearances by Bank of England Governor Andrew Bailey.

This is after the Governor said Wednesday there are “good reasons to expect inflation to fall sharply over the coming months, beginning with the April number,” and soon after Office for National Statistics figures indicated the beginnings of a deterioration in the labour market.