Ella 
Had one been privy to the US jobs data prior to its official release, expectations would have leaned towards a surge in US treasury yields and a strengthening of the dollar. However, the reality unfolded differently as the three major US equity markets experienced significant declines.
For the seventh month in the past eight, non-farm payrolls exceeded consensus estimates. March saw the addition of 303,000 new jobs, surpassing even the most optimistic forecasts by analysts, who had projected an addition of 200,000 jobs.
While US yields closed the week on a strong note, with the yield on the benchmark 10-year note logging a weekly close above 4.40% for the first time since November, the dollar failed to capitalize on early gains during the US session. The S&P 500 and Nasdaq gained over 1%, while the Dow advanced 0.80%, reversing much of the previous day’s losses driven by geopolitical tensions between Iran and Israel.
In addition to the robust growth in headline jobs, the unemployment rate fell from 3.9% to 3.8%, despite an increase in the participation rate. Average hourly earnings matched expectations, with wage inflation climbing from 0.2% to 0.3% in March.
The immediate market reaction saw the dollar moving higher as US yields surged, with the dollar index (DXY) reaching highs just shy of 104.70. However, the DXY’s upside was capped around 105.00, tentatively signaling a potential reversal pattern.
The New Zealand dollar (NZD) rebounded from earlier lows, with NZD/USD rising during the early hours of Thursday morning on weaker-than-expected ISM services PMI data. However, concerns over escalating tensions between Iran and Israel led to a decline in risk-sensitive assets late in Thursday’s US session.
Following the release of the US jobs numbers, NZD/USD initially fell, appearing poised to end the week in the mid to high 0.59s. However, US equity markets rebounded during US trade, with market participants disregarding the strong non-farm payrolls data, which raised expectations for fewer Fed rate cuts in 2024.
The New Zealand dollar ended the week near 0.6010, posting a week-on-week gain of +0.60%, making it one of the top performers among G10 currencies, alongside the Norwegian krone and the Australian dollar.
Looking ahead, the headline event for the week is the March US CPI report, with both headline and core inflation projected to increase by 0.3% month-on-month. A hotter-than-expected CPI report could send US equity markets lower and propel the dollar higher.
The domestic highlight is the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, although no changes are expected. Meanwhile, the European Central Bank (ECB) is also expected to maintain current policy settings, with a dovish hold likely as eurozone inflation remains subdued.
Other notable events include the Bank of Canada’s rate decision, China’s CPI data, the eurozone Bank Lending Survey, and the Michigan consumer sentiment index.
Overall, the market sentiment remains cautious, with the focus shifting to upcoming economic data releases and central bank decisions for further cues on market direction.
