Pound New Zealand Dollar (GBP/NZD) Exchange Rate up on Brexit News, BoE Rate Decision Looms

Update: GBP/NZD Exchange Rate Climbs as Pound Sterling Broadly Strengthens

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate rallied by over 0.6% on Thursday in reaction to the news that Conservative rebels defeated the government in a key Brexit vote.

The move means that the EU withdrawal bull will be amended to ensure that MPs will have a vote on the final Brexit deal.

As this increased hopes that the UK will secure a softer Brexit, the Pound climbed.

The GBP/NZD exchange rate also advanced following the release of better-than-forecast UK retail sales data. Sales excluding auto fuel were up 1.2% on the month and 1.5% on the year, smashing forecasts of 0.4% and 0.2%.

Retail sales including auto fuel were similarly impressive.

Optimism for New RBNZ Governor Keeps New Zealand Dollar (NZD) Exchange Rates Buoyed

The Pound New Zealand Dollar exchange rate remained on the back foot on Wednesday as markets reacted with optimism towards the appointment of Adrian Orr as the new Governor of the Reserve Bank of New Zealand (RBNZ).

UK Employment Data Fails to Bolster the GBP NZD Exchange Rate

Pound Sterling exchange rates fluctuated on Wednesday as UK data from the Office for National Statistics (ONS) proved slightly mixed.

On the upside, UK wage growth (including bonuses) rose by 2.5% in the three months to October 2017, beating the previous period’s upwardly revised 2.3% increase and meeting market expectations.

Excluding bonuses, earnings growth crawled up to 2.3%, beating the market consensus of a 2.2% gain.

Whilst climbing wage growth does bode well for the UK economy, the gap between soaring levels of inflation and wages still remains significant – particularly with consumer prices revealed to have climbed to 3.1% in November.

That being said, the Bank of England (BoE) expects inflation to steady into 2018 and 2019, an outcome that could give wage growth the space it needs to rebalance.

In other, slightly gloomier news, unemployment in the UK remained steady at a 42-year low of 4.3% in the three months to October, unchanged from the previous period but slightly above the market expectation of 4.2%.

The number of people ‘out of work’ but not claiming benefits (‘economically inactive’) has also grown.

Stephen Clarke, Economic Analyst at the Resolution Foundation, stated: ‘Britain’s remarkable jobs boom looks like it may have finally reached the end of the road, with employment falling slightly since June of this year’.

This news weighed on the GBP NZD exchange rate, despite Britain still having one of the highest employment rates in Europe.

High Hopes for New RBNZ Governor Propel New Zealand Dollar (NZD) Exchange Rates

While the British Pound has been fluctuating in response to local jobs data, the New Zealand Dollar (NZD) has been riding high in the wake of Adrian Orr being appointed the new Governor of the RBNZ. Orr has been described by economists as the ‘balanced choice’.

Orr currently operates as the Chief Executive Office for the New Zealand Superannuation Fund, and is regarded as having an excellent understanding of the RBNZ and its key functions.

Beyond this, Orr is no stranger to being in the spotlight and is well known for being a talented communicator; traits that many hope will provide better clarity and forward guidance in respect to monetary policy over his five-year term (due to start on the 27th of March).

Markets will be keen to see how this new appointee handles the bank’s ‘dual mandate’, however (the government’s intention to target both inflation and employment), with some investors worried that the two directives may conflict.

Nonetheless, the New Zealand Dollar (NZD) has largely retained gains accrued as a result of this news.

GBP/NZD Exchange Rate Forecast: Volatility Imminent on Fed Rate Decision

The Pound New Zealand Dollar exchange rate is likely to experience volatility later today as the US Federal Reserve announces its December rate decision and reveals its monetary policy forecast for the year ahead.

Markets are expecting a rate hike at the gathering – the third and final Fed rate hike for 2017 – although the tone of the accompanying statement is still up for debate.

A hawkish tone from Fed officials on the subject of future interest rate hikes would be US Dollar-supportive, but any indications that stagnant inflation could prevent regular rate hikes next year cold weaken USD and boost higher-risk currencies like the New Zealand Dollar.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail