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Dire UK Job Market Report Hits Pound to New Zealand Dollar Exchange Rate Outlook

Pound to New Zealand Dollar Exchange Rate Falls Back on UK Data

Today saw the publication of Britain’s August job market report, and the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate fell in reaction. The New Zealand Dollar’s (NZD) strength is mixed, but it has benefitted from Pound (GBP) losses today.

Last week saw GBP/NZD advancing amid ‘Kiwi’ weakness. GBP/NZD advanced from the level of 1.9482 to 1.9553 throughout the week, unable to hold the week’s monthly high of 1.9725.

Since markets opened yesterday, GBP/NZD has already continued its advance attempts. GBP/NZD jumped around a cent higher, but is sliding back this morning.

At the time of writing, GBP/NZD trends near the level of 1.9577 – closer to the week’s opening levels again.

The Pound outlook has the potential to worsen even further if the UK government walks away from Brexit negotiations this week.

Pound (GBP) Exchange Rates Hit by Shocking UK Job Market Report

Investors are selling the Pound today, in response to the latest UK job market data. Britain’s job market figures came in much worse than expected in major prints, worsening concerns about how the nation is being hit by the coronavirus pandemic.

Far more jobs were lost than expected, and the key unemployment rate leapt from 4.1% to a concerning 4.5% rather than the expected 4.3%.

It came as the coronavirus pandemic led to huge layoffs and redundancies across Britain.

Some analysts have been speculating that Britain’s unemployment rate could hit as high as 10%. These comments only weighed further on Sterling.

New Zealand Dollar (NZD) Exchange Rates Rebounding after Last Week’s Weakness

The New Zealand Dollar has been one of today’s better performing major currencies so far.

US Presidential Election bets are keeping market risk-sentiment buoyant. However, the relatively risky New Zealand Dollar is also gaining as it rebounds from poor performance last week.

The New Zealand Dollar outlook has been hit as the coronavirus pandemic hurts New Zealand’s tourism industry. Rising speculation that the Reserve Bank of New Zealand (RBNZ) are preparing negative interest rates are also hurting NZD.

According to Jane Foley, Senior FX Strategist at Rabobank:

‘Last month the RBNZ remarked that the pandemic and associated travel restrictions could have a significant long-term negative impact on the economy. Given the second wave of covid-19 underway in Europe and parts of the US, it is likely that border restriction will remain in place for some time yet.’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Focused on Politics

The only other noteworthy dataset due for publication this week is New Zealand’s September business PMI. It will be published during Friday’s Asian session.

Aside from this though, GBP/NZD investors will be focusing on potential political developments that could influence the outlook in the coming sessions.

The UK government’s self-imposed Brexit deadline of the 15th of October is this coming Thursday. There is still speculation that the government could walk away from negotiations if there has not been enough progress.

If UK-EU talks collapse this week, the Pound outlook may collapse as well. On the other hand, if talks continue then hopes of a deal will rise and the Pound is more likely to strengthen instead.

As for the risk and trade-correlated New Zealand Dollar, it will be focused on global risk-sentiment.

US political speculation and global coronavirus developments are most likely to influence these factors.

In fact, next weekend’s New Zealand General Election is unlikely to be as influential to the Pound to New Zealand Dollar (GBP/NZD) exchange rate as these other factors.