GBP/NZD Exchange Rate Sinks as UK Labour Market Deteriorates
The Pound to New Zealand Dollar fell by -0.2% today, with the pairing currently fluctuating around NZ$1.89.
The Pound fell against many of its peers today following the release of November’s UK ILO Unemployment Rate, which rose from 4.9% to 5% – a four-year high.
Samuel Tombs, the Chief UK economist at Pantheon Macroeconomics, also warned that joblessness would rise further, forecasting at least a 6% increase in spring.
Mr Tombs commented:
‘The labour market no longer is deteriorating, with employment falling in November at the slowest three-month-on-three-month pace since March and payroll employee numbers recovering fully from November’s drop in December.
‘[T]he unemployment rate will jump in Q2, probably to about 6%, when many firms—especially in the retail and consumer services sectors—likely will not ask all of their furloughed staff to return to work, and some people who left the workforce at the start of the pandemic return when the economy has reopened.’
As a result, GBP investors are becoming more concerned about rising joblessness and the effect of the nationwide lockdown in the next few months.
Meanwhile, 9.8% of those in the top four vulnerable categories have received their first dose of the Covid-19 vaccine.
However, with those in hospital continuing to rise, GBP investors are remaining cautious as we could see the nationwide lockdown extended beyond the mid-February Government review.
New Zealand Dollar Rises as Outlook for New Zealand Economy Improves
The New Zealand Dollar has continued to benefit from renewed optimism in the Chinese economy, which posted strong data last week.
China is New Zealand’s largest trading partner, so any improvement in the world’s second-largest economy is NZD-positive.
Today also saw China and New Zealand sign and upgrade a free trade pact to improve exporting in the Pacific, therefore creating greater access to China.
New Zealand Prime Minister Jacinda Arden said:
‘China remains one of our most important trade partners…For this to take place during the global economic crisis brought about by COVID-19 makes it particularly important.’
Meanwhile, speculation over the Reserve Bank of New Zealand (RBNZ) easing its monetary policy as the outlook for the nation’s economy improves, has also boosted the NZD/GBP exchange rate.
GBP/NZD Outlook: New Zealand Trade Balance Report in Focus
New Zealand Dollar traders will be looking forward to tomorrow’s New Zealand Trade Balance data for December.
If New Zealand’s exports rose last month, then we will see the ‘Kiwi’ head higher as the nation’s economic outlook improves.
Meanwhile, if China continues to post positive economic data, demand for the risk-sensitive NZD will increase.
Sterling traders will continue to monitor Covid-19 developments within the UK.
If Britain’s coronavirus infection rate continues to drop – and vaccinations continue to rise – then we could see the GBP/NZD exchange rate begin to head higher.
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