Overnight the ‘Kiwi’ achieved a seven-week high against the US Dollar as investors bet that tomorrow’s US non-farm payrolls report will disappoint expectations.
Hopes for a strong US jobs figure were dented yesterday as the ADP employment change report fell shy of forecasts.
As two ANZ currency experts observed; ‘Markets took a dim view of US employment indicators, leading to USD weakness against NZD. ADP employment and ISM non-manufacturing employment both signalled downside risks to Friday’s payrolls and thus the US recovery in general.’
The New Zealand Dollar also benefited as Ukraine-focused discussions between world leaders restored risk appetite.
However, the South Pacific asset did weaken against a broadly bullish Australian Dollar after reports showed that Australia’s trade surplus swelled to its widest for 2 ½ years and retail sales jumped by 1.2 per cent in January, month-on-month, rather than the 0.4 per cent estimated.
December’s retail sales gain was also positively revised to 0.7 per cent.
The ‘Kiwi’ began European trading in a slightly stronger position against the Pound despite the fact that the British currency was boosted ahead of the Bank of England’s rate decision.
While the expectation that the Bank of England will leave fiscal policy unaltered in the face of the UK’s brightening economic outlook pushed the Pound close to a four-year high against the US Dollar, Sterling was softer against commodity-driven currencies like the New Zealand and Australian Dollars.
Unless the Bank of England massively surprises expectations, GBP/NZD movement is likely to be limited in the hours ahead.
As currency strategist Michael Sneyd highlights; ‘There’s very few expectations for the meeting. We still like Sterling and are currently looking for opportunities to put long positions back on. The data flow has been very solid and that should keep the Pound supported.’
Economic data for New Zealand has been severely lacking this week and the ‘Kiwi’s movement will continue being occasioned by global developments into the weekend.
As Australia is New Zealand’s main trading partner, the AiG performance of construction index for the former nation (which is due out at 22:30) could have an impact on the ‘Kiwi’.
The publication of the Bank of England’s 12 month inflation expectation report may also trigger GBP/NZD fluctuations before the weekend.
Next week New Zealand data to be aware of includes the nation’s manufacturing activity gauge, house sales figures, retail card spending report and performance of manufacturing index.
Of course the Reserve Bank of New Zealand’s interest rate decision, taking place on Wednesday, will be hugely influential.
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,0.8444,
New Zealand Dollar,,Euro,0.6135,
New Zealand Dollar,,Australian Dollar,0.9343 ,
New Zealand Dollar,,Pound Sterling,0.5044,
US Dollar,,New Zealand Dollar,1.1913 ,
Euro,,New Zealand Dollar,1.6275 ,
Australian Dollar,,New Zealand Dollar,1.0690 ,
Pound Sterling,,New Zealand Dollar, 1.9801,
[/table]
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