GBP to NZD Exchange Rate Surges to Fresh 2019 Best on New Zealand’s Job Market Disappointment

May 1, 2019 - Written by Minesh Chaudhari

STORY LINK GBP to NZD Exchange Rate Surges to Fresh 2019 Best on New Zealand’s Job Market Disappointment

The Pound remained one of the more appealing major currencies today, despite a lack of fresh Brexit developments. Instead, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate climbed amid some fairly supportive UK data, as well as broad fresh losses in the New Zealand Dollar after the latest disappointing New Zealand job market stats.

After slipping slightly last week, from the level of 1.9435 to 1.9385, GBP/NZD has already regained those losses and then some this week so far. GBP/NZD surged by around a cent yesterday and has seen another rise of around a cent since today’s Asian session began.

At the time of writing on Wednesday afternoon, GBP/NZD was trending near a 2019 high of 1.9669. This was the best level for the pair since October 2018.

The primary cause of GBP/NZD gains this week has been due to soft Brexit hopes, but the broad weakness in the New Zealand Dollar caused by Reserve Bank of New Zealand (RBNZ) interest rate cut bets made those gains even easier.

GBP Exchange Rates Benefit from Continues Brexit Speculation and Manufacturing Data

On Tuesday, weeks of mixed and limp Pound movement came to an end for now as investors reacted to reports claiming that the tone of Brexit talks between the UK government and opposition Labour Party had become more optimistic.

In speculation that bolstered hopes that cross-party talks could lead to a softer Brexit, the Pound saw a surge in demand.

Since then, the Pound has even sustained those gains despite a lack of solid developments on the talks, as well as concerns that talks could collapse if a deal isn’t reached by the time of this month’s upcoming EU elections.

The Pound did hold its ground thanks to some UK manufacturing data today, which printed slightly above expectations at 53.1.

However, the data wasn’t all optimistic, and the Pound’s reaction to it was subdued as analysts mentioned uncertainties in Britain’s factory outlook. According to Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply:

‘Concerns intensified over whether there would be enough demand in the coming months to dislodge current supplies and companies reviewed their staffing levels with employment falling for the third time in four months’

NZD Exchange Rates Plunge Following Shocking Slump in New Zealand Employment

The New Zealand Dollar has been among the least appealing major currencies over the past few weeks, as a dovish Reserve Bank of New Zealand (RBNZ) combined with continued weakness in New Zealand data has caused RBNZ interest rate cut bets to rise.

With RBNZ interest rate cut bets rising, the New Zealand Dollar has been consistently unappealing, and recent data has done little to change that.

The latest New Zealand data only further ignited RBNZ interest rate cut bets, as New Zealand’s Q1 job market report disappointed investors in many key prints.

While the unemployment rate did improve to 4.2% as expected, this was due more to an unexpected slump in the participation rate – from 70.9% to 70.4%.

The employment change figure revealed an unexpected drop in jobs of -0.2%, rather than rising 0.5% as forecast.

According to Jason Attewell, Labour Market and Household Stats Senior Manager at Stats NZ:

‘New Zealand has seen a softening of economic growth as measured by gross domestic product over the last six months, and we now are seeing that softening come through the employment rate,’

This caused another New Zealand Dollar slump on Wednesday and left GBP/NZD near its best levels all year.

GBP/NZD Exchange Rate Forecast: Central Bank and Brexit News Take Focus

While no Brexit developments are certain to emerge over the coming sessions, they still have the potential to cause significant Pound to New Zealand Dollar exchange rate movements.

As the latest Pound gains have been due to hopes for a soft Brexit deal in cross-party talks, these gains could be reversed if there are no solid developments in talks either.

Due to the UK economic outlook’s reliance on the outcome of Brexit, tomorrow’s Bank of England (BoE) policy decision is unlikely to be particularly influential for Pound investors unless the bank takes a surprising tone on Brexit.

New Zealand Dollar investors, on the other hand, will remain focused on global trade developments, as well as Reserve Bank of New Zealand (RBNZ) interest rate cut bets.

No more New Zealand data will be published this week, leaving investors anticipating next week’s major RBNZ policy decision.

The RBNZ decision will be held during Wednesday’s Asian session. If the bank signals an interest rate cut could happen in the coming months as analysts expect, the New Zealand Dollar will remain unappealing.

However, if the bank takes an unexpectedly optimistic tone, the Pound to New Zealand Dollar exchange rate could plunge as the New Zealand Dollar would recover.

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TAGS: Pound New Zealand Dollar Forecasts