The Pound (GBP) to New Zealand Dollar (NZD) exchange rate rallied on Thursday as the UK currency found support from comments made by Bank of England policy maker Martin Weale. The ‘Kiwi’ also fell sharply against the US Dollar after the market deemed the ‘Greenback’s’ fall was overdone.
On Wednesday, the Pound had been under sustained pressure against most of its major peers as Tuesday’s weak inflation data caused investors to push back their expectations for a rise in interest rates.
The currency then rallied after BoE monetary policy maker Martin Weale said that the bank should ignore the inflation report and raise rates.
The session’s better-than-expected Unemployment rate and wage growth data was also another reason for the BoE to push ahead with rate rises. Weale believes that the fall in unemployment will lead to wage growth increasing in speed.
Weak wage growth has been a major cause for concern for the bank.
‘The tightening of the labour market means that, instead of waiting to see wage growth pick up, I think it is appropriate to anticipate that wage growth will increase. The margin of spare capacity is shrinking rapidly and all logic suggests that ought to lead to an increase in inflationary pressures over the two to three-year horizon which concerns the Committee,’ Weale said.
Sterling was also able to regain ground as the US Dollar rallied which in turn put pressure upon the ‘Kiwi’. Concerns over geopolitical issues and falling commodity prices also returned to send the currency lower.
US Dollar Rally Weakens ‘Kiwi’
The New Zealand Dollar had managed to hit a three-week high against the ‘Greenback’ early in the session as dairy prices were shown to have increased. Early in the morning, dairy product prices rose in Fonterra Cooperative Group’s fortnightly GlobalDairyTrade auction, recovering from the lowest level in five years, as fewer products was offered for sale.
Those gains were short-lived after economists deemed the US Dollars declines as being overdone.
“The data which sparked the move was weaker than expected but overall data-wise, and as far as the growth outlook is concerned, the U.S. looks more than favorable than elsewhere,” said Ian Stannard, the London-based head of European foreign-exchange strategy at Morgan Stanley. “We believe the overall dollar-positive trend is still very much in place. This should provide some renewed buying opportunities.”
As a result, the US Dollar strengthened broadly to put pressure upon the ‘Kiwi’.
New Zealand Dollar (NZD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
New Zealand Dollar,
,US Dollar,0.7936 ,
New Zealand Dollar,, Pound Sterling,0.4964 ,
New Zealand Dollar,,Euro,0.6201 ,
New Zealand Dollar,,Australian Dollar,0.9069 ,
Euro,, New Zealand Dollar ,1.6106 ,
US Dollar,, New Zealand Dollar ,1.2593 ,
Australian Dollar,, New Zealand Dollar ,1.1004 ,
Pound Sterling,, New Zealand Dollar ,2.0106 ,
[/table]
