A rocky five days of trading saw the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate drop from a multi-year peak of 2.3989 to a low of 2.3376 before news from China saw the pairing recover to 2.3796.
Last Tuesday the New Zealand Dollar was pressured lower against a number of its currency counterparts as the GlobalDairyTrade auction revealed another dramatic slump in the price of New Zealand’s key export. As well as trending at an over five-and-a-half year low against the Pound, the ‘Kiwi’ was left struggling against rivals like the US Dollar.
New Zealand’s employment data for the second quarter piled additional pressure on the commodity-driven currency by revealing that the nation’s unemployment rate climbed to 5.9% in the three months through June as a result of a markedly slower pace of job creation. As the report and downturn in dairy prices led some investors to bet that the Reserve Bank of New Zealand (RBNZ) might slash borrowing costs further, demand for the ‘Kiwi’ was muted at best.
However, the GBP/NZD exchange rate swiftly gave up gains on Thursday as the hotly-anticipated ‘Super Thursday’ of announcements from the Bank of England (BoE) failed to deliver. In an attempt to make its dealings more transparent to the public, the BoE elected to publish its meeting minutes on the day of its interest rate decision for the first time in history. The fact that the central bank’s always influential quarterly inflation report was also released on Thursday led to the day acquiring its upbeat moniker. But investors hoping for some assurance that the BoE had plans to increase borrowing costs around ‘the turn of the year’ were left disappointed as the central bank cut inflation forecasts and the minutes revealed that just one member of the Monetary Policy Committee (MPC) voted for an immediate adjustment of borrowing costs. The Pound plummeted across the board as the market reeled in the wake of ‘Not-So-Super’ Thursday and the British currency held declines into the weekend.
As a fresh week of trading began the Pound started to find its feet again and developments in China soon helped the British asset stage an impressive rebound against the New Zealand Dollar. Both the ‘Kiwi’ and ‘Aussie’ dropped on Tuesday as commodity-driven and emerging-market assets lost appeal as a result of the People’s Bank of China’s (PBoC) decision to devalue the Chinese Yuan in order to help China emerge from its current slowdown.
After the PBoC announcement the Pound Sterling to New Zealand Dollar exchange rate hit a high of 2.3823.
Whether or not the Pound is able to hold on to these gains largely depends on Thursday’s employment figures for the UK. As a dip in both positions and average earnings has been projected, there’s every chance of BoE interest rate hike expectations being pushed back even further and the Pound faltering against its currency counterparts. Ecostats from New Zealand with the potential to initiate GBP/NZD movement include the nation’s Business NZ Performance of Manufacturing Index and second quarter retail sales numbers.
On Tuesday the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending in the region of 2.3784
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