Pound New Zealand Dollar (GBP/NZD) Exchange Rate Soars Following Encouraging UK Pay Figures

March 21, 2018 - Written by John Cameron

STORY LINK Pound New Zealand Dollar (GBP/NZD) Exchange Rate Soars Following Encouraging UK Pay Figures

The Pound New Zealand Dollar (GBP/NZD) exchange rate struck a new three-month high today as markets reacted to some upbeat employment statistics from the UK.

Pound (GBP) Bolstered by Impressive Wage Growth Figures

Sterling rocketed higher against the New Zealand Dollar this morning as markets welcomed an upbeat labour report from the UK, with some upbeat earnings figures appearing to be particularly supportive of the Pound.

According to data released by the Office for National Statistics (ONS) UK wage growth struck 2.8% in January, easily beating expectations it would only reach 2.6%, while December’s reading was revised up from 2.5% to 2.7%.

This was the strongest rise since 2015 and also suggests that wage growth has begun to outpace inflation once again, after yesterday’s CPI figures revealed that headline inflation fell to just 2.7% in February.

The ONS suggested that the increased wage growth was largely prompted by high levels of employment and an increased number of workers moving from part-time to full time positions, with analysts confident that this trend will continue well into 2018.

Ian Stewart, chief economist at Deloitte said;

‘The post-Brexit squeeze on consumer spending power is easing. Low unemployment, a slowing flow of overseas workers into the UK and high levels of job vacancies are raising wage pressures and boosting job moves.

The number of people resigning from one job to move to another fell in the wake of the financial crisis, but is now running at its highest level since 2001.

The scene is set for a pickup in earnings growth this year.’

Markets are hoping that end of the pay squeeze on workers may help to relieve some of the financial pressure facing households, which in turn may translate into strong economic growth as consumer spending begins to pick up.

The wage figures were also supported by the accompanying release of the UK’s latest unemployment figures, with the ONS reporting that the jobless rate unexpectedly fell back to a 42-year low of 4.3% at the start of the year after rising to 4.4% in December.

Investors will now eye the Bank of England’s (BoE) latest rate decision tomorrow, and whether today’s data will be enough to spur the bank in striking a more hawkish tone going forward.

New Zealand Dollar’s (NZD) Tumbles Ahead of RBNZ Policy Meeting

Meanwhile the New Zealand Dollar finds itself on the back foot this afternoon in the lead up to the Reserve Bank of New Zealand’s (RBNS) latest monetary policy decision.

Economists currently forecast that the bank is likely to vote to leave interest rates at a record-low of 1.75% this month.

While to decision to leave rates on hold is unlikely to come as much of a surprise to markets, some investors began to shy away from the ‘Kiwi’ at the start of today’s session amid rumours that the bank is likely to strikes a decidedly dovish tone in its outlook for the rest of 2018.

This comes on the back of a disappointing run of economic data and rising concerns that global growth could be undermined by Donald Trump protectionist trade agenda.

GBP/NZD Exchange Rate Forecast: Market Focus to Turn to BoE Rate Decision

Looking past the RBNZ’s rate decision the GBP/NZD exchange rate is set to see further movement on Thursday as the BoE concludes its own March policy meeting.

While the BoE is not expected to make any alterations to its monetary policy this month, investors will be keen to see if today’s wage figures will have prompted a more hawkish outlook from policy makers.

There been considerable speculation in recent weeks over the possibility of the bank targeting a May rate hike, with any comments in support of this likely to bolster the Pound.

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