Over the past seven days the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within the range of 2.1840 to 2.2277.
‘Kiwi’ (NZD) Strengthened Last Week by PBoC Intervention
Despite the fact that China’s equity markets registered losses throughout last week, the New Zealand Dollar advanced versus a number of its most traded currency peers. The appreciation can be linked to intervention from the People’s Bank of China (PBoC), with the central bank injecting a record amount of cash into local markets in the hopes of stabilising the Yuan. Speculation that China’s central bank will look to do everything within its power to shore up the Yuan ahead of the week-long Lunar New Year break was also supportive of ‘Kiwi’ demand. Another reason that the New Zealand Dollar advanced last week was surprise inaction from the Reserve Bank of New Zealand (NZD). However, as the central bank did express concerns over the strength of the domestic currency, the RBNZ could well introduce additional stimulus measures if the New Zealand Dollar continues to appreciate.
Towards the tail-end of last week the Pound struggled, dipping from a three-week high against the US Dollar. The depreciation was mostly the result of mounting uncertainties with regard to the forthcoming EU referendum. Additionally, demand for the British asset has faltered in response to speculation that the Bank of England (BoE) will not look to hike the overnight cash rate until 2017. It is looking increasingly likely that Governor Mark Carney will be the first BoE chief since 1949 to complete his tenure without altering interest rates.
GBP/NZD Exchange Rate Rallied as Chinese Manufacturing Output Fell to a Three-Year Low
Today has seen the Pound Sterling advance versus the New Zealand Dollar by around 0.6%. Demand for the high-yielding ‘Kiwi’ cooled in response to disappointing Chinese economic data. China’s official factory gauge fell to a three-year low of 49.4 in January, marking a record sixth consecutive month of contraction. This caused demand for risk-correlated assets to slump significantly with falling commodity prices adding to trader anxiety. Tomorrow will see the results of the latest Global Dairy Trade Auction which is very likely to shake things up for the South Pacific asset.
Meanwhile the Pound advanced versus most of its major peers after domestic data bettered expectations. January’s British Manufacturing PMI was forecast to decline from 52.1 to 51.6, but the actual result was an advance to 52.9. However, analysts have warned that there are a number of headwinds for British manufacturers and the sector could resume struggles seen in the last quarter of 2015.
GBP/NZD Exchange Rate Outlook: BoE ‘Super Thursday’ to Provoke Volatility
As mentioned above, the upcoming Global Dairy Trade Auction results will have a significant impact on the New Zealand Dollar and therefore the GBP/NZD exchange rate. However, trader focus is likely to be dominated by the BoE’s ‘Super Thursday’ of announcements this week, so called because the BoE’s inflation report will be published alongside the interest rate decision and accompanying meeting minutes. The inflation report will be particularly important given that policymakers have cited low consumer prices as one of the main reasons to keep monetary policy outlook ultra-accommodative. Tomorrow’s Australasian session will see the release of New Zealand’s Unemployment Rate and Employment Change reports which will also be likely to provoke GBP/NZD exchange rate movement.
Heads Up
Summary of major upcoming data releases that we think may move the market.