GBP to NZD Exchange Rate Recovers from Lows on UK Data

May 3, 2017 - Written by John Cameron

STORY LINK GBP to NZD Exchange Rate Recovers from Lows on UK Data

While the Pound put in a strong Tuesday recovery against most major rivals, the Pound to New Zealand Dollar exchange rate has trended more closely to its weekly lows this week due to strong New Zealand data and improving commodity news.

GBP/NZD began the week trading at the level of 1.8860, but fell for the first half of the week. By Wednesday, the pair had hit a low of 1.8565. GBP/NZD recovered from these lows during Wednesday’s European session but remained around two cents below the week’s opening levels.

The Pound has been weighed down by renewed Brexit concerns this week. Over the weekend, rumours emerged that European Commission leader Jean-Claude Juncker had finished a dinner with UK Prime Minister Theresa May feeling more sceptical on Brexit than he had been before.

While the UK government played down the rumours, May stated in the general election campaign trail this week that Juncker would find her to be a ‘bloody difficult’ person, increasing market concerns that Brexit negotiations would be off to a rough start.

These Brexit jitters have prevented Sterling from capitalising on this week’s strong UK manufacturing and construction PMIs. These stats have benefitted the Pound slightly however, keeping it away from its lows against a strong New Zealand Dollar.

Demand for the New Zealand Dollar has improved notably this week, after poor performance in April due to low risk-sentiment.

Tuesday saw the Global Dairy Trade (GDT) hold its first May auction. Prices of dairy, New Zealand’s most lucrative commodity, rose by 3.6%. This took dairy prices to their best 2017 levels so far.

‘Kiwi’ demand also got a strong boost from this week’s New Zealand job stats, which were published during Wednesday’s Asian session.

New Zealand’s unemployment rate unexpectedly improved from 5.2% to an impressive 4.9% in Q1 2017, despite being projected to remain at 5.2%.

This was partially due to an unexpected rise in New Zealand’s participation rate, but also strong employment change stats of 1.2% quarter-on-quarter and 5.7% year-on-year. These beat forecasts of 0.8% and 5.3% respectively.

This has also made NZD traders more optimistic about next week’s Reserve Bank of New Zealand (RBNZ) meeting. Hopes are rising that the RBNZ will avoid making any further interest rate cuts.

The Pound is more likely to drive GBP/NZD exchange rate movement for the rest of this week however, due to key UK ecostats due on Thursday.

Britain’s highly anticipated April services PMI from Markit will be published, as well as mortgage approval and consumer credit results for March.

If UK services beat expectations, concerns that Britain’s economy is slowing will be delayed for the time being. However, poor services data will only increase analyst calls that Britain’s economy is in for a 2017 slowdown.
This is because the services sector makes up most of Britain’s economic growth, making it a key stat for Pound to New Zealand Dollar traders this week.

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