Pound to New Zealand Dollar (GBP/NZD) Climbs after New Zealand Labour Market Stats Disappoint

May 6, 2015 - Written by Tim Boyer

STORY LINK Pound to New Zealand Dollar (GBP/NZD) Climbs after New Zealand Labour Market Stats Disappoint

GBP/NZD Gains after Poor Labour Market Data

The Pound was offered some support against the ‘Kiwi’ when New Zealand labour market stats failed to impress investors. The New Zealand Employment Change figure came in at only 3.2% in the first quarter of 2015, falling from the previous 3.6% recording. Economists’ had expected a dip to a slightly more favourable 3.3%. Meanwhile, the New Zealand Unemployment Rate number rose from what was initially thought to be 5.7% (but was later revised to 5.8%) to remain at 5.8% in the three months through March, moving in the opposite direction from expectations which had suggested a favourable decline to 5.5%.

Statistics New Zealand stated: ‘The unemployment rate remained at 5.8% in the March 2015 quarter – unchanged from a revised rate of 5.8% for the December 2015 quarter. While the unemployment rate was unchanged, there were 3,000 more unemployed people over the quarter.’

The labour market ecostat saw speculation heighten over whether the Reserve Bank of New Zealand will be verging toward an interest rate cut in the near future. The central bank recently changed its tact when it comes to interest rates when it opened the door to rate cuts rather than rises.

Will the RBNZ Cut Interest Rates?

Economist Philip Borkin threw in his two cents, saying: ‘However, the main news was again the significant growth in labour supply, with another solid gain in the working age population and record participation ensuring the unemployment rate remained unchanged (at an upwardly raised level). This supply response is capping wage inflation – which surprised on the downside and is even showing signs of further moderation based on some measures – reinforcing that the labour market is at the heart of the current “solid growth but low inflation” conditions the economy is experiencing. It ensures the risks around OCR settings are skewed downwards.’

The ‘Kiwi’ exchange rate could plummet if the OCR experiences a downward revision or is hindered by several dovish comments from the RBNZ. Meanwhile, the Pound was trading tentatively ahead of the UK general election on Thursday. However, the UK services sector proved fruitful in April with the index rising from 58.9 to 59.5. Thursday will see the release of April’s UK New Car Registrations data which resided at 6.0% in March. Friday will be slightly more influential for the currency pair with the UK Trade Balance figure emerging.

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TAGS: Daily Currency Updates New Zealand Dollar Forecasts Pound Forecasts