Monday morning commentary from Westpac in NZ (Imre Speizer) in response to Friday's NFP

  • A very strong report
  • The three-month average is a decent 187k, off its best levels earlier this year of 240k but at least stabilising
  • By industry, solid breadth is apparent
  • Household employment backs the establishment survey, showing a +320k gain, and +313k entered the labour force too.
  • U6, the broader measure of unemployment favoured by some Fed members, fell from 10.0% to 9.8%, the first time below 10% in nearly 5 1/2 years.
  • Barring a complete breakdown in next month's data and a very sharp surge in market volatility, lift-off in December is almost a done deal.

Bolding for emphasis is mine

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His currency outlook:

AUD/USD

  • 1 day: Momentum remains negative, targeting 0.6935 during the next few days. The increasing likelihood of a Fed rate hike in December should see the US dollar outperform most currencies.
  • 1-3 month: The resumption of the strong US dollar uptrend should weigh on AUD/USD during the next few months. The next major downside target is 0.6900, beyond that 0.6700.

NZD/USD

  • 1 day: Momentum remains negative, targeting 0.6455 during the next few days. The increasing likelihood of a Fed rate hike in December should see the US dollar outperform most currencies.
  • 1-3 month: The resumption of the US dollar uptrend should weigh on the NZD during the next few months. We target 0.65 initially (major support in July and August), but as far as 0.62 is possible. The two main factors expected to contribute to NZD/USD weakness are RBNZ easing (we expect the OCR to fall to 2.00% next year) and eventual Fed tightening.