GBP to NZD Ending Week Higher Despite Lack of Pound Optimism

March 10, 2017 - Written by Toni Johnson

STORY LINK GBP to NZD Ending Week Higher Despite Lack of Pound Optimism

The British Pound to New Zealand Dollar exchange rate has advanced over the last week despite a lack of appeal in Sterling amid mixed ecostats and fresh Brexit jitters. Low risk-sentiment has seen traders selling off the New Zealand Dollar.

GBP/NZD began this week trading at the level of 1.7460 and has gained over a cent throughout the week. By Friday, the pair was trending near the level of 1.7600 where it trended at the time of writing. It failed to hold a weekly high of 1.7669.

GBP Fails to Benefit from This Week’s UK Data

The Pound has trended limply this week and has largely been able to gain against the New Zealand Dollar due to ‘Kiwi’ weakness.

Sterling gained limited support from Friday’s January UK trade deficit update. The deficit was predicted to improve from -£3.3b to around -£3.1b, but December’s figure was revised higher to -£2.03b and January’s came in at -£1.97b.

However, the Pound failed to capitalise on the better-than-expected trade data as economic activity shrunk in January. Manufacturing and industrial production both contracted month-on-month and failed to meet expectations in yearly prints.

Due to a lack of consistently decent UK ecostats this week as well as growing jitters about the upcoming Brexit process (which could begin in a matter of weeks), the Pound has been limp and easily swayed by rivals this week.

NZD Appetite Fades as Fed Hike Bets Solidify

A lack of supportive local data, weakening commodity prices and lower risk-sentiment have left the New Zealand Dollar as one of this week’s most poorly performing major currencies.

The primary reason for the New Zealand Dollar’s weakness throughout the week has been fading demand for risk-correlated currencies. With US data consistently impressing investors, bets of a Federal Reserve interest rate hike next week have risen to over 85%.

The possibility of higher yields from a ‘safe haven’ currency like the US Dollar has dampened demand for the risky ‘Kiwi’.

This week’s New Zealand data has also failed to impress. February’s card spending reports saw contractions and the week’s Global Dairy Trade (GDT) auction saw prices of New Zealand’s most lucrative commodity, dairy, plunge in price by over -3%.

GBP/NZD Forecast: Bank of England (BoE) Meeting Next Week

After this week’s uninspiring UK news, investors will be looking towards next week’s Bank of England (BoE) meeting for any glimmers of excitement in Britain’s economic outlook.

If the Bank of England (BoE) is optimistic about UK 2017 growth expectations despite recent concerns that the retail and services sectors could plunge due to spiking inflation, Sterling could see some relief.

However, the Brexit process remains a notable weight. There is wide speculation that UK Prime Minister Theresa May is aiming to activate Article 50 and begin the Brexit process as soon as next week.

If the Brexit process does indeed begin, the Pound is likely to see a brief selloff. Other UK data due for publication next week includes January’s UK employment stats.

Next week’s New Zealand economic calendar is looking a little busier, with consumer confidence stats coming in on Tuesday’s Asian session, followed by current account data on Wednesday and most vitally, New Zealand’s Q4 Gross Domestic Product (GDP) report on Thursday.

Even if these New Zealand ecostats impress however, a potential Federal Reserve interest rate hike could see the ‘Kiwi’ plunging.

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TAGS: Currency Predictions Pound New Zealand Dollar Forecasts