New Zealand’s quarterly jobs report reflected cooling labor market conditions as employment fell 0.1% in Q2 2025, but the Kiwi found support from rising wage pressures.
Let’s examine which pairs from our watchlist made sense to work with and how they performed in this environment of moderate conviction and mixed fundamental drivers:
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The Setup
- What We Were Watching: New Zealand’s Q2 2025 Employment Report
- The Expectation: Employment change to dip 0.1% quarter-on-quarter, unemployment rate to rise from 5.1% to 5.3% and the labor cost index to rise from 0.4% to 0.5%
- Data outcome: Employment fell 0.1% q/q as expected, jobless rate rose to 5.2% and labor cost index accelerated to 0.6%
- Market environment surrounding the event: Neutral to negative risk sentiment; investors reacting to Trump’s latest threats of higher tariffs on EU, chips and pharma, plus weaker outlook from downbeat U.S. ISM services PMI
Event Outcome
New Zealand’s employment report showed a 0.1% quarter-on-quarter decline in hiring as expected, while the previous reading was downgraded to show a flat figure from the earlier 0.1% uptick. The jobless rate rose from 5.1% to 5.2% – just a notch lower than the projected 5.3% figure – while the labor cost index reflected higher wage pressures as it climbed from 0.4% to 0.6%, outpacing the 0.5% consensus.
Key points from the New Zealand jobs report:
- Unemployment rose modestly: The seasonally adjusted unemployment rate increased to 5.2% from 5.1%, with the number of unemployed people reaching 158,000
- Employment rate declined: The employment rate fell to 66.8% from 67.1%, with total employed persons at 2.88 million compared to 2.91 million a year earlier
- Regional job losses concentrated: Auckland saw the largest employment decline with 23,100 fewer jobs, followed by Waikato (-11,100) and Taranaki (-5,200)
- Wage growth moderated: All salary and wage rates increased 2.4% annually, while average ordinary time hourly earnings rose 4.5% to $43.39
The modest uptick in unemployment came alongside a decline in the employment rate, signaling that fewer working-age New Zealanders are finding jobs in an increasingly challenging economic environment.
The data painted a picture of gradual labor market cooling, but with wage pressures sticky enough to keep the RBNZ from going full dovish. Governor Orr’s subsequent comments emphasized the bank’s data-dependent approach while acknowledging the need to balance employment concerns with inflation control.
Fundamental Bias Triggered: Bullish NZD Setups
The week started with markets still digesting Friday’s shocking U.S. jobs miss, which had repriced September Fed cut odds to nearly 90%. Risk sentiment remained fragile as Trump’s weekend tariff threats continued reverberating through markets.
Markets went into the New Zealand jobs release coming from a mostly risk-off mood, as U.S. equities and commodities were in selloff mode following the U.S. ISM services PMI miss. At the same time, investors had also been reeling from Trump’s warnings about higher trade levies on the EU should talks break down, plus hints of tariffs targeting semiconductors and pharmaceuticals next.
Still, the U.S. dollar found itself on the back foot, as Trump’s testimony also featured another round of criticism against Fed head Powell while suggesting other candidates to take his place soon. The spotlight also turned to geopolitical tensions with Russia on rumors that additional oil-related sanctions were on the table.
Sentiment improved midweek, though, as markets turned their attention to dovish Fed commentary and the possibility of seeing lower borrowing costs lift spending and investment activity down the line. Although tariffs drama returned to the limelight the following day, markets held on to cautious optimism after White House officials assured that trade deals were being made, possibly easing uncertainty soon.
For Canada specifically, Trump’s escalation from 25% to 35% tariffs created an increasingly challenging backdrop for CAD. The diverging tariff impacts became a key theme – while New Zealand faced a 15% levy, Canada’s 35% rate created a clear disadvantage. This disparity, combined with New Zealand’s limited trade exposure to China relative to other commodity currencies, provided underlying support for NZD crosses.
The week’s risk sentiment swung between cautious optimism on trade deal hopes and renewed pessimism as tariff announcements continued. This backdrop made event-driven strategies particularly challenging, as even solid fundamental analysis could be overwhelmed by broader market catalysts.
GBP/NZD: Net Bullish NZD Event outcome + Risk-On Scenario = Arguably the best odds of a net positive outcome
GBP/NZD 4-hour Forex Chart by TradingView
This setup was considered the best despite by strong risk-off flows emerging from a downbeat U.S. ISM services PMI and a fresh round of tariff drama leading up to the jobs release. We felt that the strong read in NZ wage costs and expectations of BOE rate cut outweighed the exogenous drivers, especially as we saw the broad risk environment shift net positive through the Wednesday session.
So we actually did see GBP/NZD post NZ Jobs data, but the BOE surprised the markets with a “hawkish cut” in having fewer policymakers vote for easing during Thursday’s decision, lifting the pair back up to R1 (2.2530) and past support-turned-resistance zone by Friday.
This strategy likely on brought a net positive outcome to those who executed a more active trade management style, particularly those who felt the need to take some profits/reduced risk ahead of the BOE statement. For those who didn’t, they likely saw net negative outcomes.
Not Eligible to move beyond Watchlist – Bearish NZD Setups and GBP/NZD short setup
NZD/CAD Net Bullish NZD Event outcome + Risk-Off Scenario
NZD/CAD 1-hour Forex Chart by TradingView
This setup was invalidated due to the improve broad sentiment, but would have played out nicely thanks to weakness in oil adding to CAD’s relative under performance against higher bet currencies like NZD.
NZD/CAD had been hovering right around the descending triangle bottom while waiting for the New Zealand employment release, dipping slightly below the .8140 support level as risk-off flows had weighed on higher-yielding currencies in the previous session.
The actual report pulled NZD/CAD right back above the triangle support, as traders appeared to focus more on the strong wage figures versus the quarterly dip in hiring and negative revision to the previous reading. The rally was extended later in the day after a bit of consolidation and pullback, as the shift in market sentiment appeared to favor NZD versus the oil-related CAD.
Price sailed through the dynamic resistance at the 200 SMA and the pivot point level (.8180) as crude oil took further hits on weaker than expected Chinese trade balance and more tariffs drama, plus easing supply concerns on some developments in the US-Russia front.
Kiwi also drew additional support from a slight uptick in inflation expectations, taking NZD/CAD up to the .8200 major psychological resistance just below the triangle top on Friday’s Asian session.
EUR/NZD Long: Net Bearish NZD Event outcome + Risk-On Scenario
EUR/NZD 1-hour Forex Chart by TradingView
The target event did not favor a bearish NZD setup, as the green shoots in the jobless rate and wage growth caught Kiwi bulls’ attention.
The euro got a lift from dollar weakness but couldn’t match the enthusiasm around a less dovish RBNZ outlook after the jobs report. Euro bulls also stayed cautious with the shadow of EU–US trade talks hanging over the market. The EU may have agreed to pause countermeasures while talks continue, but Trump kept the pressure on with threats of higher tariffs if the negotiations hit the rocks.
While this setup was invalidated, it looks like fundamental themes and developments would have made short plays result in potentially positive in outcomes, with some dependence in prop trade and risk management strategies & execution.
NZD/JPY Short: Bearish NZD Event outcome + Risk-Off Scenario
NZD/JPY 1-hour Forex Chart by TradingView
The bearish NZD outcome did not materialize, as traders paid closer attention to stronger wage growth and the fact that the headline employment figure did not fall short of consensus.
Although markets had been in a risk-off mood leading up to the jobs release, sentiment also shifted in favor of higher-yielding currencies as cautious optimism returned in the days that followed. In addition, yen weakness also came into play as some Japanese officials dampened BOJ tightening expectations, while the possibility of Trump imposing additional 15% tariffs on Japan loomed.
So there should not have been any short plays on NZD/JPY, for those who adapted to the improving risk environment and the strong NZ wage growth read, changing bias and proper trade management and execution would have likely resulted in a net positive outcome.
The Verdict
New Zealand’s upbeat jobs report kept the door open for long Kiwi trades, expectations remained for a BOE rate cut, and we saw a shifting risk environment from net negative to positive on Wednesday. This meant that GBP/NZD was the pair to have both fundamental and sentiment probabilities triggered, and move forward for further due diligence and trade planning.
Improvements in risk appetite continued to favor the higher-yielding Kiwi throughout the day and the next day to turn a GBP/NZD short idea into a potentially profitable one, but the surprise net hawkish outcome of the Bank of England monetary policy statement changed the outcome of having a short bias on GBP/NZD.
With GBP/NZD reversing its initial down move to eventually close the week above the pre-NZ jobs event, active trade management and execution would have been a big factor in the net outcome. Overall, we’d rate this discussion as “neutral” in supporting a potential net positive outcome.
Key Takeaways:
1. Prioritize Active Trade Management Over Passive Position Holding
In several scenarios, we saw that traders who employed “active trade management” – taking profits before major events like the BOE decision – would have likely achieved better outcomes than those who held positions passively. For the GBP/NZD strategy, those who reduced risk ahead of the Bank of England statement saw net positive results, while passive holders experienced losses when the “hawkish cut” surprised markets.
Action: Implement systematic profit-taking rules and position sizing adjustments around known high-impact events, rather than hoping your initial analysis will play out perfectly.
2. Broader Market Sentiment Often Trumps Fundamental Analysis
Even when the fundamental analysis of New Zealand’s employment data was accurate in terms of anticipating the market’s post event behavior, exogenous factors like Trump’s tariff threats, shifting risk sentiment, and other central bank decisions had greater influence on currency movements. The article notes how “even solid fundamental analysis could be overwhelmed by broader market catalysts.”
Action: Always assess the macro environment and risk sentiment before executing event-driven trades. Consider how broader themes (geopolitical tensions, central bank communications, trade disputes) might overshadow your specific fundamental thesis.
3. Build Scenario-Based Planning with Adaptive Bias
The analysis shows how several initially bearish NZD setups became invalid when market sentiment shifted from risk-off to risk-on mid-week. Successful traders were those who “adapted to the improving risk environment” and changed their bias based on evolving conditions, rather than stubbornly sticking to original analysis.
Action: Create multiple scenarios for your trades (bullish event + risk-on, bullish event + risk-off, etc.) and define clear criteria for when to pivot your bias. Don’t marry your initial thesis – be prepared to reverse course when market dynamics change.
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