The Pound New Zealand Dollar exchange rate rose sharply during the first half of last week, but a disappointing ‘Super Thursday’ quickly changed Sterling’s trajectory.
Bank of England ‘Super Thursday’ Proves Anything But for GBP
The Pound was able to rise on Monday, even though data showed that consumer credit had reached £200 billion; the highest level since the financial crisis in 2008.
A better-than-expected performance from the Markit UK manufacturing PMI for July on Tuesday caused the Pound to appreciate sharply against the New Zealand Dollar.
The index was predicted to climb from 54.2 to 54.5, but instead jumped to 55.1. A strong uptick in export orders, as the weakness in Sterling increased the attractiveness of UK products, helped drive industry activity higher.
Wednesday’s July construction PMI failed to repeat the manufacturing PMI’s showing, instead slumping from 54.8 to 51.9 against forecasts of a drop to 54.
Thursday saw the Pound start off on a strong footing after the services PMI beat expectations to clock in at 53.8.
However, the ‘Super Thursday’ of Bank of England (BoE) releases proved disappointing.
Only two policymakers voted for interest rate hikes, with BoE Chief Economist Andy Haldane backing a rate freeze, despite having sounded confident in July that rate hikes may be needed soon.
The inflation forecast saw GDP and wage growth forecasts revised lower, causing GBP NZD to crash from the two-and-a-half-week peak of 1.7911 to 1.7666.
Poor Dairy and Unemployment Data Keeps NZD on the Downtrend
A trio of disappointing data releases pushed the New Zealand Dollar lower at the start of the week.
The ANZ activity outlook fell from 42.8 to 40.3 and the business confidence index from 24.8 to 19.4, while the Chinese manufacturing PMI weakened further-than-expected from 51.7 to 51.4.
The NZD sell-off accelerated on Tuesday after the latest Global Dairy Trade event revealed a -1.6% drop in the price of New Zealand’s key export.
The ‘Kiwi’ continued to fall on Wednesday as markets reacted to the second-quarter labour market data.
Although unemployment fell from 4.9% to 4.8% as expected, there was a significant drop in the participation rate and wage growth failed to pick up to quite the levels forecast, boding ill for the inflation outlook.
The Pound’s ‘Super Thursday’ tumble enabled the New Zealand Dollar to recover some of the week’s losses, with the ‘Kiwi’ pressing higher on Friday despite strong US jobs figures.
Today the GBP NZD exchange rate has shot 1% higher after the Reserve Bank of New Zealand’s (RBNZ) latest 2-year inflation expectation weakened from 2.17% to 2.09% in the third-quarter.
RBNZ Interest Rate Decision Forecast to Create GBP NZD Volatility
Wednesday will be a significant day for GBP NZD, with the New Zealand Dollar firmly in charge of exchange rate movement.
The latest Chinese consumer price index will give an indication of how demand for New Zealand exports is likely to hold up over the coming weeks.
In the evening the RBNZ will announce its latest monetary policy decisions; the tone taken by Governor Graeme Wheeler in the subsequent press conference could significantly alter the interest rate outlook and therefore strengthen or undermine the New Zealand Dollar.
Wheeler appears before the Parliament Select Committee early on Thursday morning and could clarify the previous day’s remarks.
Meanwhile the Pound will have its first impactful data releases of the week, which will arrive in a slew of reports.
Industrial, manufacturing and construction output figures will be accompanied by trade balance data and the latest NIESR GDP estimate.
US inflation data at the end of the week could undermine the New Zealand Dollar and give the Pound a leg-up if it raises the odds of an interest rate hike from the Federal Reserve.