While the news that a gauge of UK home values declined unexpectedly saw the Pound slip against peers like the Euro this morning, the British asset was still holding its own against the New Zealand Dollar.
Yesterday Sterling recorded notable gains against the majority of its currency counterparts thanks to an encouraging inflation report from the Bank of England.
The Pound clung to its advance against the ‘Kiwi’ overnight and the GBP/NZD pairing began the local session little changed.
However, the New Zealand Dollar achieved an almost two-week high against its Australian counterpart following the publication of disappointing employment data for the larger South Pacific nation.
Australia’s unemployment rate jumped to an 11-year high after the nation unexpectedly shed 3,700 positions in January.
This news caused some investors to pare back bets regarding the likelihood of the Reserve Bank of Australia increasing interest rates, and made the Reserve Bank of New Zealand’s position more attractive by comparison.
The ‘Kiwi’ was also supported against its major peers by the news that New Zealand’s manufacturing sector expanded for a 16th month in January – indicating that a strong local currency hasn’t adversely impacted activity.
The Business New Zealand Performance of Manufacturing Index came in at 56.2 last month, just down from the reading of 56.4 recorded in December.
The level of new orders slipped from 61.4 to 60.2, just holding above the 60 mark, while production expanded from 57.2 to 59.5.
Economist Doug Steel said this of the result; ‘The strong positive momentum from last year has continued. Manufacturing growth continues despite the general strength of the New Zealand Dollar.’
According to Steel, the impact of a bullish ‘Kiwi’ has been offset by a surge in domestic investment. He added that another factor ‘is a big increase in agriculture income courtesy of a 40-year high in the terms of trade and the increased purchasing power for investment and consumption that the country enjoys as a result.’
The ‘Kiwi’ was also stronger against the US Dollar ahead of the release of advance retail sales figures for the world’s largest economy.
The report is forecast to show stagnation in sales in January following a slight gain of 0.2 per cent in December.
Earlier this week Fed Chairman Janet Yellen pledged to continue with the Federal Reserve’s current course of steadily tapering stimulus, but a surprising fall in sales could encourage her to rethink her position and might trigger widespread ‘Greenback’ declines. Investors will also be focusing on today’s US initial jobless claims figure.
New Zealand’s food price report, due out at 21:45 GMT, is unlikely to have much of an impact on the ‘Kiwi’s exchange rate, but Chinese inflation data will be of interest.
Before the weekend UK construction output data could drive additional GBP/NZD movement.
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,0.8327,
New Zealand Dollar,,Euro,0.6096,
New Zealand Dollar,,Australian Dollar,0.9295 ,
New Zealand Dollar,,Pound Sterling,0.5005,
US Dollar,,New Zealand Dollar,1.2022 ,
Euro,,New Zealand Dollar,1.6372 ,
Australian Dollar,,New Zealand Dollar,1.0753 ,
Pound Sterling,,New Zealand Dollar, 1.9962 ,
[/table]
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