Overnight the New Zealand Dollar advanced on a broadly softening ‘Greenback’ and held steady against the Pound. During European trading the ‘Kiwi’ retained its US Dollar gains but edged lower against its British counterpart.
Although yesterday’s disappointing first quarter US growth figures were largely due to the adverse weather conditions seen at the beginning of the year (and are therefore unlikely to affect fiscal policy long term) the USD to NZD exchange rate still softened following the release of the GDP report.
The US Dollar also softened in response to the Federal Open Market Committee’s policy decision. The continued tapering of stimulus was expected, but the central bank also made it clear once again that it has no intention of increasing interest rates in the short term.
As stated by senior FX strategist Sam Tuck; ‘The US is in a deeper hole than we thought and climbing out of it, because of the increased depth, is going to take longer. The US data, while remaining optimistic, should ensure carry and growth for New Zealand Dollar investors remain attractive for a while.’
After the FOMC announcement the New Zealand Dollar extended gains against its US peer. The ‘Kiwi’ was little changed against the Pound having advanced on the currency after UK growth figures also fell short of expectations.
The South Pacific asset was unaffected by the news that China’s manufacturing PMI advanced by less-than-anticipated.
Economists had predicted that the Markit manufacturing gauge would rally from 50.3 to 50.5 in April, moving further away from the 50 line separating growth from contraction.
However, the measure was shy of expectations at 50.4 – indicating that the Chinese government may have to introduce additional stimulus to ensure that the nation’s economic slowdown doesn’t deepen.
During the European session the New Zealand Dollar slipped against a supported Pound.
The Pound to New Zealand Dollar exchange rate (GBP/NZD) is currently trading around 1.9585 as of 11:20 GMT 02/05/14.
Sterling hit a four-year high against the US Dollar and recovered losses against several of its other major currency counterparts as a measure of UK manufacturing rallied to its highest level since November last year.
Rather than easing from 55.8 in March to 55.4 in April, the measure jumped to 57.3, well above the dividing line between contraction and expansion.
The report prompted this response from forex strategist John Hardy; ‘It’s another strong data point. We saw a breakout yesterday where Sterling closed above those highest levels, finally getting clear of the 1.6820 Dollar area, so it’s open fields from here.’
Separate UK figures showed that house prices climbed by 1.2 per cent in April, month-on-month.
The Bank of England also published mortgage approval data which showed an unexpected decline in March.
US reports could have an impact on the currency market as the day progresses, but further movement in the Pound to New Zealand Dollar (GBP/NZD) pairing is more likely to be triggered tomorrow by New Zealand’s commodity price data and the UK’s construction report.
If today’s US initial jobless claims, manufacturing and personal spending figures disappoint expectations the NZD/USD could creep higher before Friday’s highly influential US non-farm payrolls data.
New Zealand Dollar (NZD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
New Zealand Dollar,
,US Dollar,0.8623,
New Zealand Dollar,,Euro,0.6217,
New Zealand Dollar,,Australian Dollar,0.9274,
New Zealand Dollar,,Pound Sterling,0.5104,
US Dollar,,New Zealand Dollar,1.1624,
Euro,,New Zealand Dollar,1.6109,
Australian Dollar,,New Zealand Dollar,1.0767,
Pound Sterling,,New Zealand Dollar, 1.9609,
[/table]
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