British Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Weaker, Sterling Forecasts to Lower

July 13, 2014 - Written by David Woodsmith

STORY LINK British Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Weaker, Sterling Forecasts to Lower

The British Pound to New Zealand Dollar (GBP/NZD) exchange rate is currently trading down at 1.94055, with Sterling forecasts predicted by economists to fall in opposition to the flourishing NZ currency.

Friday has been a disappointing day for the Pound with economists forecasting a fall for the Strong Sterling.

After weeks of positivity for the UK by way of data releases, the Pound looks set to drop after the UK trade deficit widened unexpectedly, house price increases became sluggish, and industrial output flopped.

An expert in the field at Morgan Stanley, Ian Stannard, stated: ‘There are signs that after this recent Sterling rally things have got a little bit stretched and overextended. The medium – and long-term picture is still positive, so even if we do see a correction as we see the data coming in a bit softer than expectations, that will still provide a very good buying opportunity for Sterling.’

The New Zealand Dollar to US Dollar exchange rate on the other hand has been growing from strength to strength currently trading at 0.8821.

New Zealand received encouraging news this week from credit ratings agency, Fitch, when they raised New Zealand’s sovereign status to positive.

They stated: ‘The macroeconomic record and prospects are supportive. New Zealand’s economic policy framework, business environment and standards of governance rank among the world’s strongest from a credit perspective, and warrant high-grade sovereign ratings.’However, with poor Chinese data, and the Australian Dollar falling the ‘Kiwi’ may be unable to maintain recent highs. Fitch continued: ‘Fiscal consolidation is strengthening the resilience of New Zealand’s sovereign credit profile. The authorities have a credible plan to lift the fiscal surplus in the years ahead.’

The high Pound however is causing concern amongst businesses in the UK, with retail giants such as Burberry and AB Foods commenting that the high Sterling exchange rate is causing a loss in profits.

Bloomberg have commented: ‘The Pound surged 11% in the past year, making it the best performer among 10 developed nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors bet that the strength of the recovery would compel the Bank of England to be the first major central bank to end extraordinary stimulus measures.’

NZ Dollar Forecast - NZD Could Gain on PSI Data

The Pound was encouraged by recent speculation of interest rate hikes for the UK, however after this week’s revelation that the Bank of England don’t intend to raise rates in the imminent future, Sterling drooped against other major currencies.

The ‘Kiwi’ could gain support from the New Zealand Performance Services Index released on Sunday at 22:30GMT, whilst the Pound will see influential data released on Tuesday by way of the UK Consumer Price Index and Producer Price Index.

Wednesday is another data heavy day for the UK with the publishing of Jobless Claims, Claimant Count, Average Weekly Earnings, Employment Change, and Unemployment Rate data, which could help to support the Pound if favourable.

Tuesday evening will show the New Zealand Consumer Price Index, whilst Wednesday will publish New Zealand House Sales data. Alternatively China will release GDP figures on Wednesday - currently forecast to be favourable to China - that could affect the ‘Kiwi’. The ‘Kiwi’ however looks very firm in the currency market having already executed three successful interest rate hikes this year, with the possibility of more to follow.

In comparison, although speculation in the UK has been popular for the UK economy and interest rate rises, for now it appears that the Bank of England will keep interest rates down until the economy becomes stronger.

With recent observations amongst economists that the UK could be slowing down its recent rally, it may appear that the Bank of England were right to keep the rates low. An economist for the British Chambers of Commerce, David Kern, stated: ‘The [Bank’s Monetary Policy Committee] has made the right decision to keep interest rates and quantitative easing on hold.’ Furthermore with heavy UK data releases next week, economists should have a better understanding of the state of the UK economic growth and the viability of a strong Sterling asset.

Latest NZ Dollar Exchange Rates - 13/07/2014

The Pound to New Zealand Dollar exchange rate is 1.94055 GBP/NZD.
The Euro to New Zealand Dollar exchange rate is 1.54354 EUR/NZD.
The US Dollar to New Zealand Dollar exchange rate is 1.13435 USD/NZD.
The New Zealand Dollar to Australian Dollar exchange rate is 0.93864 NZD/AUD.

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TAGS: Pound New Zealand Dollar Forecasts