New Zealand Dollar falls on mixed labor data, macroeconomic uncertainty

• The New Zealand Dollar pulls back despite a solid increase in employment in the fourth quarter.
• An unexpected rise in the Unemployment Rate tempers optimism around the labor market.
• The US macro backdrop and monetary policy expectations weigh on the pair.

NZD/USD trades around 0.6000 on Wednesday at the time of writing, down 0.90% on the day, as investors digest mixed New Zealand labor market data and an uncertain global macroeconomic environment.

The New Zealand Dollar (NZD) fails to sustain gains following the release of strong employment figures for the last quarter of 2025. Employment Change rose by 0.5% on a quarterly basis, after a flat reading in the previous quarter, and beat the market consensus of 0.3%. This performance points to some resilience in economic activity and an underlying improvement in labor market conditions.

However, this positive signal is offset by an unexpected increase in the Unemployment Rate, which climbed to 5.4%, its highest level in nearly a decade, while analysts had expected a steady reading at 5.3%. According to BBH, this rise partly reflects stronger labor force participation, which puts the apparent deterioration into perspective but also confirms the presence of spare capacity in the New Zealand economy. The bank also notes that wage pressures remain contained, limiting near-term inflation risks.

Against this backdrop, prospects for monetary tightening by the Reserve Bank of New Zealand (RBNZ) remain limited. The easing in labor costs relative to expectations and the persistence of a negative output gap argue in favor of keeping monetary policy unchanged for an extended period, capping the appeal of the NZD.

On the international front, the US Dollar (USD) trades with a more mixed tone following the release of weaker-than-expected US employment data. The ADP report showed that private-sector job creation in the United States (US) totaled just 22,000 in January, well below market expectations. This figure reinforces the view of a gradual cooling in the labor market, even as some activity indicators, such as the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), remained in expansion territory. The Services PMI printed at 53.8, unchanged from the previous month, but its Employment and New Orders components pointed to some loss of momentum.

In addition, delays in the release of official US labor market data, due to a temporary federal government shutdown, keep investors cautious. This combination of factors maintains some volatility in the Greenback and contributes to a bearish bias in NZD/USD, despite encouraging signals from New Zealand’s labor market.