Pound Sterling Stalls, Gains Forecast for GBP NZD Exchange Rate

April 23, 2015 - Written by John Cameron

STORY LINK Pound Sterling Stalls, Gains Forecast for GBP NZD Exchange Rate

The Pound Sterling (currency:GBP) has struggled to assert itself in the global currency markets during today’s session following a highly positive showing yesterday.

The downside pressure on the UK unit was driven by this morning’s domestic Retail Sales data which printed far below expectations. Analysts had been anticipating a year-on-year showing of 5.5% from the March number – instead they got an annualised 4.2%. The data also revealed a monthly reduction of 0.5% versus the counterpart February number versus an anticipated increase of 0.4%. All in all a bad lot for Sterling.

The Pound plunged against both the euro (currency:EUR) and the US Dollar (currency:USD) following the release. The GBP EUR exchange rate dipped to an intraday low of 1.3957 this morning – the pair had been tipping the scales at 1.4050 during early trading. The Pound recorded similar losses against the US Dollar on the day, with GBP USD dropping from a daily high of 1.5040 to 1.4960 a short time ago.

However, it wasn’t a case of bad news all the way for Sterling on the day – official figures published at the same time as the British shop sales data revealed that the total level of government borrowing last month stood at £7.4bn. This brings the total level of British government borrowing this financial year to £87.3bn versus an anticipated level of £90.2bn. These are large numbers, but the fact that they under-shot expectations provided the Pound with a fillip.

The one currency which Sterling convincingly outperformed on the day was the New Zealand Dollar (currency:NZD). The Pound Sterling New Zealand Dollar exchange rate climbed by over 1.00% on the day to trade up to as high as 1.9910 following surprising comments from Reserve Bank of New Zealand (RBNZ) Assistant Governor John McDermott overnight. McDermott ruled out an interest rate hike from the RBNZ, stating that, ‘at present, the bank is not considering any increase in interest rates. Before considering any tightening in monetary policy, we would need to be confident that increased capacity utilisation and labour market tightness was generating, or about to generate, a substantial increase in inflation.’ This apparent ruling out of any RBNZ policy tightening is forecast to send the GBP NZD exchange rate higher into the medium term.

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