Weaker than anticipated New Zealand labour market figures, released in the middle part of last week’s session, caused pronounced selling pressure on the Kiwi Dollar.
Foreign Currency Market Update – GBP / NZD Update
Weaker than anticipated New Zealand labour market figures, released in the middle part of last week’s session, caused pronounced selling pressure on the Kiwi Dollar, taking the GBP NZD exchange above the 2:1 level for the first time since the 2nd January. The job numbers revealed that domestic unemployment had risen from 6.3% in the last three months of 2011 to tip the scales at a heady 6.7% in the first quarter of this year. Analysts had been expecting the figures to show that New Zealand unemployment had dropped slightly to 6.2% in the three months to the end of March. The surprisingly bad release caused investors to speculate that the global slowdown in economic activity, which has been evident since the turn of the year, is starting to impact heavily upon the Kiwi economy, which remains heavily dependent upon the export of its raw materials. This in turn, prompted investors to downwardly adjust their expectations for the future direction of interest rate decisions by the Reserve Bank of New Zealand, hitting the NZD hard.
Things got worse for the risk-sensitive New Zealand Dollar as the week drew to a close, with Friday afternoon’s release of April’s Non-Farm Payrolls data in the US. The numbers came in below par for the second month in succession, showing that the largest economy in the world had only managed to generate 115,000 new jobs last month, versus expectations of a 160,000 increase. The disappointing American data saw appetite for risk drain from the markets ahead of Friday’s close, taking the Kiwi Dollar lower.
The NZD has experienced a renewed bout of downside pressure since the markets re-opened on Sunday night, as fears increased over fiscal stability in the eurozone. This saw the GBP NZD exchange rate rise to 2.0435 yesterday, its highest level since the week preceding Christmas 2011. The European concerns follow the results of Greece’s general election, which saw a fragmentation of the popular vote, with ‘anti-bailout’ parties garnering almost 70% of the ballots cast. With no party having gained overall control and only a slim chance of a coalition emerging from the debris, another Greek election is anticipated for next month. However, the Greek people have issued a resounding ‘vote of no confidence’ in their country’s continued participation in the EU/IMF/ECB bail-out. If the troubled Hellenic state does fail to keep to the terms of its bail-out agreement, then Greece will experience a ‘hard default’ on its debt, triggering panic in the markets and causing a move out of the NZD, sending GBP NZD sharply higher.
However, the GBP NZD exchange rate has come a long way in a short space of time following its mid-February downward move to the key interim floor of 1.8634. If speculators choose to ‘take profit’ at the current rate, then the pair could rapidly move back below the 2:1 level once more.
Summary of major upcoming data releases that we think may move the market.
- The AUD came under further selling pressure in the middle part of last week
- The Canadian Dollar came under selling pressure in the early part of the week
- Pound to Australian Dollar Forecast – The Australian Dollar came under pronounced selling pressure at the start of last week’s session
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Kiwi surges 8% in four weeks
- Pound Sterling to New Zealand Dollar Foreign Currency Exchange Rate Forecast – Kiwi stabilises as stock markets rebound…