Dovish ‘Super Thursday’ Sends Pound Sterling Tumbling
Another rate hold, a pessimistic outlook on the UK economy and a change of heart by a usually hawkish Monetary Policy Committee (MPC) member have all combined to push Pound Sterling deep into negative territory. Ian McCafferty, who has voted in favour of hiking during the past few meetings, has this time voted in line with the other policymakers to preserve interest rates at their current level.
New Zealand Dollar (NZD) Strong as TTP Deal Signed
The ‘Kiwi’ has been strengthened today by the signing in New Zealand of the Trans Pacific Partnership (TTP) agreement. The trade deal, which is one of the biggest multinational deals ever, involves twelve nations and covers 40% of the world economy. TTP has the possibility to create another single market similar to that of the EU and will strengthen New Zealand’s economic ties with countries including the US, Canada, Mexico, Singapore and Japan.
Yesterday…
Pound Sterling (GBP) has had some welcome news today in the form of positive Markit PMIs. However, much better-than-expected jobs data has strengthened the New Zealand Dollar (NZD) to a greater extent.
Strong Services PMI Boosts Pound Sterling (GBP) as ‘Brexit’ Fears Abate
After a disappointing Construction PMI yesterday, today’s Markit PMIs for the UK have brought some welcome news. The service industry, which accounts for around three-quarters of UK GDP, saw a slight expansion, with the index rising from 55.5 to 55.6 instead of the 0.1 point decline anticipated by economists. The service sector was almost entirely responsible for UK GDP growth in the final quarter of 2015, so a strong performance is vital if the UK economy is to perform well over the coming months.
Although positive, Markit Chief Economist Chris Williamson noted some points of concern in the data, explaining that ‘The three PMI surveys for January collectively point to a slight upturn in the rate of economic growth, consistent with GDP rising at a quarterly rate of 0.6% in the first quarter, up from 0.5% in the fourth quarter, if current levels are sustained. However, order book backlogs are already falling at the fastest rate for almost three years and companies have scaled back their hiring in response to growing uncertainty about the economic outlook at home and abroad.’
Uncertainty over the ‘Brexit’ referendum has abated slightly as well now that there is a draft proposal on the table for several reforms to the UK’s membership.
Despite these strengthening factors, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trading down -0.8% in the region of 2.1936.
New Zealand Dollar to Pound Sterling (NZD/GBP) Exchange Rate Bullish Thanks to Unemployment Fall
Unemployment in New Zealand defied predictions of a ten basis point increase to fall 0.8% in the final quarter of 2015, taking the total rate of joblessness down to 5.3%. The Employment Change figure stood at 1.3%, slightly down from the previous quarter but higher than the 1.1% predicted, a 0.9% increase after the previous -0.5% contraction.
The news has seen the New Zealand Dollar gain 0.8% on Pound Sterling, 0.9% against the Australian Dollar (AUD), 1.1% against the Euro (EUR), 1.9% against the New Zealand Dollar (NZD) and 2.2% against the Canadian Dollar (CAD).
The figures have been so positive that the New Zealand Dollar has so far remained impervious to another large drop in dairy prices.
The New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate is currently trading between 0.4517 and 0.4576.
Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: Super Thursday Ahead
Tomorrow is another Bank of England (BoE) Super Thursday, which sees the next interest rate decision coincide with the quarterly Inflation Report. The last Super Thursday severely weakened the Pound for a long period after the surprisingly dovish tone of the report took investors by surprise. Given the current global conditions, it is possible tomorrow’s release could be even more pessimistic.
There is no data due for New Zealand for the rest of the week.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending between 2.1839 and 2.2136.
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