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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Wavers as Both Currencies Enjoy Tailwinds

September 14, 2021 - Written by John Cameron

Pound-to-New Zealand Dollar-rate-

GBP/NZD Exchange Rate Trades Level Amidst Strong Trading Sentiment

The Pound (GBP) was unable to exert major gains against the New Zealand Dollar (NZD) through today’s session, despite impressive UK employment data raising GBP sentiment. Expectations of strong consumer confidence and current account figures may have bolstered the ‘Kiwi’

At the time of writing, GBP/NZD is trading at NZ$1.9480, virtually unchanged from today’s opening levels.

Pound (GBP) Firms on Strong Employment Data

The Pound rose against the majority of its peers today, as UK employment data reported a slight drop in July’s unemployment rate and an 8.3% rise in average earnings. According to analysts, a ‘hiring frenzy’ has begun as the country’s economy reopens.

Today’s data shows that payrolled employment rose by almost quarter of a million last month as more people rejoined the labour market and businesses expanded operations. Such figures support analysts’ suggestions that the UK’s economic recovery is on track.

Optimistic forecasts from economists were one factor boosting GBP sentiment. Kitty Ussher, chief economist at the Institute of Directors, remarks that ‘the economy is now well-prepared for the end of furlough’ – a measure which is due to end on the 30th of this month.

The UK government also published its autumn and winter Covid plan this afternoon, abolishing some of the uncertainty that had previously caused headwinds. In it, the government stipulates it will use pharmaceutical interventions, identifying and isolating positive cases and international collaboration measures to limit the virus’s further spread.

Health secretary Sajid Javid also outlined a ‘Plan B’ to prevent unsustainable pressure on the NHS if case numbers increase significantly. Contingency measures included legally mandating face coverings in certain settings, as well as asking people to work from home where possible.

New Zealand Dollar (NZD) Resists Significant Downside on Positive Forecasts

The New Zealand Dollar (NZD) fell against several of its peers today, but managed to maintain a level trajectory against the Pound. ‘Kiwi’ downside was likely limited by an alternately risk-on mood, in addition to optimistic data forecasts over the remainder of the week.

Westpac consumer confidence is looking to rise this evening, suggesting households feel more optimistic about New Zealand’s economic situation. The country’s current account balance is also expected to post a surplus of NZ$1.1bn, drawing the country out of deficit.

More importantly, New Zealand’s GDP data will print tomorrow and is forecast to post annual gains of 16.3%. If the growth rate prints as expected, the ‘Kiwi’ will likely find headwinds: these may subsequently be compromised, however, by a low-scoring Business PMI in Thursday’s session.

Another factor potentially limiting NZD gains is the situation in China. While global markets have become largely desensitized to rumours of economic slowdown, current concerns may have some bearing on trading sentiment.

Most recently, the securities of China's second-largest property developer are trading as if bankruptcy is imminent, potentially leaving millions of Chinese home buyers and contractors with unpaid bills and unfinished projects. A protest from 100 disenchanted investors descended on the company in Shenzhen yesterday.

As New Zealand’s biggest trading partner, tensions in China may threaten NZD sentiment.

GBP/NZD Exchange Rate Forecast: Tailwinds all Round?

Tomorrow holds potential for both currencies to climb, as UK inflation looks to print high and New Zealand’s yearly GDP figures are expected to print high.

Further trading direction may be influenced by external factors; a risk-off mood would suppress both GBP and NZD, while potential Brexit headwinds may limit Pound gains, to the benefit of the New Zealand Dollar.

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