New Zealand, Australian Dollar vs Pound Sterling: AUD, NZD Hit by Chinese PMI Scare
- Written by: Gary Howes
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The pound sterling (GBP) took a hit against the Aus and NZ dollars in morning trade when it was shown that the UK unemployment rate rose to 7.2%, analysts had expected a reading at 7.1%.
The Aus Dollar fell against several peers after Chinese manufacturing data disappointed the markets overnight Thursday. The HSBC Manufacturing Index fell to a seven month low of 48.3 this month raising concerns that the Chinese economy is slowing. The ‘Aussie’ was weighed upon after its US counterpart found support after the release of the Federal Reserve minutes.
The New Zealand Dollar is close to two-week lows against the US Dollar and Pound following the release of downbeat data in China. The Asian country is New Zealand’s second biggest export partner so any negative data has an impact on the ‘Kiwi’.
However, GBP exchange rates have recovered somewhat, particularly on the observation that all other elements of today's labour market figures were positive.
"PPI data from New Zealand will be published this evening (21:45) however we doubt this will make any significant impact on the rate. With the attention firmly on developments in the UK, pressure on the kiwi has eased. The New Zealand dollar is firmer today, and the pound will struggle to keep the rate above 2.00," says a note on the GBP/NZD from analyst Sasha Nugent at CaxtonFX.
Turning to the Australian dollar (AUD), the Aussie fell further from recent highs after data overnight showed that activity in Chinese factories fell at its fastest pace in five years in February. The surprisingly weak PMI data sent commodity prices sharply lower and dented the appeal of the Aussie, whose economy remains heavily dependent on Chinese demand.
Australian wage growth slips, inflationary pressures seen lower
The Aus dollar found no support earlier today when it was shown wage growth had dipped in Australia.
Earlier today it was shown growth in the wage price index (total hourly rates of pay excluding bonuses) was 0.7% q/q in Q4 2013 (Mkt: 0.6% q/q).
This was slightly higher than Q3’s unusually low 0.5% q/q increase.
"Despite this, the annual pace of wage inflation slowed to 2.6% y/y which is the weakest since the series commenced in 1999, and has slowed more than 1ppt from the recent peak of 3.8% y/y in Q2 2012," notes Riki Polygenis at ANZ Research.
Polygenis adds:
"For monetary policy, weak wage growth is encouraging from an inflation perspective. While non-tradables inflation has been slow to respond (with non-tradables inflation even excluding ‘administered’ items stubbornly high), it is still expected to flow through in coming years and help offset higher tradables inflation from the weaker currency.
"Low wage inflation will also act to constrain growth in household income and consumption. While we continue to attribute only a small probability to further monetary policy easing, rate hikes remain some way off some way off (and are not pencilled in until Q1 2015)."
