The Pound Sterling to US Dollar (GBP/USD) exchange rate and Pound to New Zealand Dollar (GBP/NZD) currency pair were charging higher on Tuesday after UK wage growth data surprised markets.
Although there may be a backdrop of Brexit chaos as both sides try to clinch a deal, the latest labour market figures were enough to buoy investor sentiment in the Pound. UK wage growth hit a nine-year high, coming in at 3.1% on the year which fuelled Sterling gains.
US Dollar Forecast: Federal Reserve Meeting Minutes Approach
Coming up, US Industrial Production, Manufacturing Production, and the NAHB Housing Market Index will all be released in Stateside trading. Wednesday could be an interesting day for the US Dollar when the Federal Reserve releases it’s meeting minutes from the September 26th Federal Open Market Committee (FOMC) meeting.
However, the minutes’ revelation may not be as influential as normal. Global Reach Chief Economist Eimear Daly commented:
‘The typical focus on the Federal Reserves’ minutes of its latest meeting will this time be limited as the dramatic developments in global bond and equity markets since the September 26th meeting makes these minutes relatively stale. Chairman Jerome Powell’s press conference following the rate decision also means the Board’s decision-making process has now been well explained to markets. The focus will be on the Committee’s view of the inflation process, which several Board members have already suggested will determine the pace of rate increases.’
New Zealand Inflation Jumps, Taking the Kiwi Dollar with it
The release of the New Zealand Consumer Price Index (CPI) overnight was an interesting event. While economists had forecast inflation to rise from 1.5% to 1.7% in the third quarter on the year, the ecostat smashed expectations with consumer prices surging by 1.9%. The quarterly pace increased by 0.9%, the quickest rise since Q1 2017.
The Kiwi Dollar surged on the news as markets wondered whether the Reserve Bank of New Zealand (RBNZ) would be forced to look at adjusting its monetary policy stance. After the inflation reading, the RBNZ also released its own Sectoral Factor Inflation Gauge, which came in at 1.7% on the year.
Economist Marcel Thieliant said:
‘The RBNZ will probably look through the jump in energy prices and conclude that underlying inflation isn’t strong enough yet to meet its inflation target of 1-3%. So there’s no need to rush to raise interest rate. Equally, though, the RBNZ doesn’t need to cut rate with headline inflation close to the midpoint of its 1-3% target and underlying inflation trending higher.’
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is trading at 2.0072, around 0..30% higher. The Pound to US Dollar (GBP/USD) exchange rate is trending in the region of 1.3232, approximately 0.60% higher.