NZD stronger as RBNZ stops buying bonds

Those hoping for another GBPNZD rise to the magic 2.00 to the Pound have had their hopes dashed again. The Reserve Bank of New Zealand surprised the markets yesterday when they announced they had halted all purchases of assets through their quantitative easing programme. Most analysts had expected the RBNZ to taper off their activity, so an absolute stop was a bit of a shock to the system. The GBPNZD rate dropped 2 cents on the news and has barely recovered by half a cent to this morning’s starting price of NZD 1.9730. NZ Dollar traders will now await this evening’s release of New Zealand inflation data. A jump is expected in the annual rate of inflation to 2.8% or similar. Anything greater than that will further strengthen the Kiwi Dollar, no doubt.

GBPCAD back up to April levels

The Bank of Canada was also in the news but their small-scale reduction in their bond-buying served to weaken the Canadian Dollar. Maybe traders don’t believe they are being decisive enough. Either way, the GBPCAD rate pushed out of the top of its recent narrow range and starts Thursday at CAD 1.7370. It is the first time we have seen this rate since 22nd April.

Australian unemployment at 28 month low

Overnight news included the Australian unemployment rate dropping to 4.9% for the first time since March 2019. That is remarkable, given the melee of the last 15 months or so. However, it was largely in line with expectations, so the GBPAUD rate is lower but not as dramatically so as the GBPNZD rate. We start the day at AUD 1.8540 to the Pound.

The overnight news wires were inundated. That news included a slowdown in Chinese GDP growth The annual rate is still enviable by most country’s standards but 7.9% annual growth is much nearer pre-covid levels.

UK earnings and employment data mixed

Sterling took a half step back this morning because the unemployment rate rose in May. Only 25,000 fresh jobs were created in the month but the unemployment rate rose to 4.8%; up from 4.7% previously. However, average earnings were up 7.3% in the three months to May compared to the same period in 2020. If you take out the covid distortions, the ONS still thinks wages are growing at between 3.9 and 5%. Add in the fact that the advance data shows a massive surge in hiring in June and the Pound ought to recover any losses. It starts the day buying USD 1.3850 and EUR 1.1710. GBPEUR just can’t seem to break that €1.1750 ceiling, can it?

The employment theme continues later today when US weekly unemployment claims data is released. The markets are expecting less than 360,000 fresh claims but this data has been very unpredictable of late, so the potential for volatility is ever-present. The Chairman of the US Federal Reserve is testifying before the Joint Economic Committee this afternoon, so we’ll study his tone and hints at the timing of monetary policy normalisation.

And on this day in 1960 (although there is some disagreement on the specific date) Chubby Checker released ‘The Twist’. The dance craze that came with the song is much beloved by aunties and grandmas at weddings these days but it was a sensation in the early 60’s. But I am not sure if you would get away with calling yourself Chubby these days without some serious online trolling.

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