Pound to New Zealand Dollar Exchange Rate Tumbles amid New Zealand Job Market Report
After attempting to recover last week’s losses at the beginning of the week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate plunged overnight in reaction to the latest New Zealand ecostats.
Last week saw GBP/NZD tumble almost two cents, from 1.9667 to 1.9484.
On Tuesday evening, GBP/NZD recovered most of those losses as investors anticipated incoming news and data, before selling the pair off. On Wednesday morning, GBP/NZD trended below the week’s opening levels, in the region of 1.9440.
There were various factors lending themselves to GBP/NZD’s latest plunge – and this time the Pound’s (GBP) Brexit jitters weren’t one of them.
Investors bought the relatively risky trade-correlated New Zealand Dollar (NZD) in reaction to the results of the US Mid-Term Elections, as well as New Zealand’s latest impressive job market concerns.
New Zealand Dollar investors now eagerly anticipate Thursday’s Asian session, when the Reserve Bank of New Zealand (RBNZ) will hold its November policy decision.
Pound (GBP) Exchange Rates Limp as Investors Anticipate Brexit Developments
Sterling saw a limited boost in demand on Tuesday, as markets reacted to a simple two-word phrase from UK Brexit Minister Dominic Raab.
Coming out of a key cabinet meeting regarding Brexit, Raab reportedly said ‘thumbs up’ – and his words offered some fresh optimism to Pound investors for the day.
Ultimately though, amid a lack of solid developments the Pound was not able to hold its ground against a stronger New Zealand Dollar on Wednesday.
Despite some signs of progress in Brexit talks over the past week supporting Sterling, analysts remain concerned about upcoming obstacles and this is limiting the Pound’s potential to climb.
Even if the UK and EU are able to agree to a Brexit deal, the deal may still face domestic obstacles from UK MPs before it can be passed into law. Essentially, the Pound outlook is still filled with uncertainties and the possibility that a Brexit deal could collapse.
New Zealand Dollar (NZD) Exchange Rates Jump as New Zealand Job Stats Impress
Despite some disappointing commodity news this week, investors bought the New Zealand Dollar overnight in reaction to the nation’s latest surprisingly strong job market report.
New Zealand’s Q3 job market report beat expectations in almost every major print, though labour cost growth was not as strong as expected throughout the quarter.
The nation’s employment change rate was expected to remain at around 0.5%, but the figure instead jumped to 1.1%. The key unemployment rate was expected to stay at 4.5% but instead saw a major improvement to 3.9%.
Investors now anticipate the Reserve Bank of New Zealand’s (RBNZ) November policy decision tomorrow, where the bank’s tone will be watched closely for any shift in tone regarding New Zealand data.
Annette Beacher from TD Securities reckons the RBNZ should play down the chances of its next move being an interest rate cut:
‘At 3.9 percent, the economy has already achieved ‘maximum sustainable employment’. Inflation is racing towards 2 percent sooner rather than later, and not just via energy prices,
The RBNZ cannot avoid these simple facts at tomorrow’s official cash rate review/monetary policy statement and needs to bin its rate cut scenario.’
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Anticipate Reserve Bank of New Zealand (RBNZ)
The New Zealand Dollar was easily able to push a limp Pound lower on Wednesday, but if the Reserve Bank of New Zealand’s (RBNZ) upcoming policy decision disappoints investors the Pound to New Zealand (GBP/NZD) could recover.
Markets don’t expect the RBNZ will make any changes to monetary policy, but any shift in tone the bank takes regarding New Zealand’s economic outlook could be highly influential.
For example, if the bank is hawkish and plays down the prospects of a New Zealand interest rate cut, the New Zealand Dollar is likely to strengthen and GBP/NZD will fall even lower.
On the other hand, a more cautious RBNZ despite recent data would leave the New Zealand Dollar weaker.
In terms of upcoming data, the remainder of this week’s notable UK data will come in on Friday and will include UK Gross Domestic Product (GDP) stats for Q3.
Pound investors are more likely to remain focused on Brexit developments though. Any signs that the UK and EU are closing in on a Brexit deal will leave the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook stronger.