Foreign Currency Market Update – GBP / NZD Update
Climatic conditions in the United States provided an unlikely source for the New Zealand Dollar’s improvement against Sterling during the final hours of last week’s trading session.
It may have been Good Friday, but the latest American labour market numbers were very far from positive; the March data showed that a relatively lowly 126,000 new jobs had been generated in the world’s largest economy. This was the first time since the early part of last year that the closely-monitored Non-Farm Payroll figure had failed to break the 200,000 threshold. Meanwhile, a downward revision to January and February’s counterpart data which showed that almost 70,000 fewer jobs had been created in the American economy during the first two months of 2015 than had previously been thought, added insult to injury. The blame for this disappointing showing was laid squarely at the feet of the inclement weather conditions in North America at the turn of the year, but nevertheless the jobs numbers caused investor sentiment to soar.
The uptick in global risk appetite was driven by the US Federal Reserve’s assertion of last month that a ‘significant improvement’ would be required in the local labour market data before it would countenance an interest rate hike. The implication that the world’s leading central bank will be continuing with its ‘easy money’ monetary policy for many months to come favoured the risk-fuelled Kiwi Dollar, sending GBP NZD down to a weekly close of 1.9634. Market-watchers will receive a further steer on the likely future direction of the Fed’s policy when the minutes of its March meeting are published tomorrow evening. Additional evidence that rates are set to remain at basement level until the final part of the year will provoke further downside for GBP NZD, potentially sending the pair further Southwards.
The pair had traded up to within a few pips of the two to one level during the middle part of the week as investors shifted out of risk-laden assets due to niggling fears over Greece’s debt negotiations. However, the Pound was already drifting against the Kiwi even before the US jobs numbers were published thanks to renewed concerns regarding the potential outcome of next month’s UK General Election. Thursday evening’s televised 7-way leaders’ debate served to muddy the waters, with the majority of analysts suggesting that a hung parliament is now a near-inevitability. Such a result would leave the world’s sixth-largest economy effectively rudderless and market participants would move out of Sterling en masse as a consequence. If opinion polls during coming weeks continue to point to a ‘no overall control’ outcome for the popular poll, then GBP NZD could track downwards towards its 17-month low of 1.9084.
Heads Up
Summary of major upcoming data releases that we think may move the market.