April 18, 2017 - Written by Tim Boyer
STORY LINK GBP NZD Exchange Rate Boosted by Surprise UK General Election Call
In the wake of the unexpected announcement that Theresa May will seek a snap general election the Pound New Zealand Dollar exchange rate made some strong gains.
GBP Quick to Recover from Snap Election Shock
Although the Pound saw some initial weakness in response to the surprise call for an election it was not long before it began to push higher across the board.
While an election brings increased political uncertainty in the short term investors are betting that the vote will result in a stronger Conservative majority in parliament.
This would remove some of the resistance to May’s Brexit plans, although such a result would also likely increase the odds of the UK facing a hard exit from the EU.
As Dean Turner, economist at UBS Wealth Management, noted:
‘We believe it is highly likely the Conservatives will increase their majority and firm up the future direction of government policy, particularly in regard to Brexit.’
If polls continue to favour a victory for May then the GBP NZD exchange rate could make further gains, benefitting from a perception of increased stability.
Rising Dairy Prices Failed to Boost NZD
Another uptick in prices at the latest GlobalDairyTrade auction failed to encourage particular demand for the New Zealand Dollar, meanwhile.
A general sense of risk aversion continued to weigh on the risk-sensitive ‘Kiwi’ as global geopolitical tensions remained heightened.
Even so, tonight’s New Zealand services PMI could put pressure on the GBP NZD exchange rate if it points towards continued solid expansion within the sector.
Further volatility is likely in store for the New Zealand Dollar with the release of the first quarter consumer price index, which is forecast to show a moderate uptick in domestic inflationary pressure.
GBP NZD Forecast: UK Retail Sales Could Dent GBP Demand
Domestic and global political developments are likely to dominate the outlook of the GBP NZD exchange rate in the coming week.
However, Friday’s UK retail sales data could discourage demand for Sterling, with sales expected to have contracted on the month in March.
This would not bode overly well for the continued health of the UK economy, which has been largely reliant on strong levels of consumer spending in the wake of the EU referendum.
On the other hand, if sales are found to have held up solidly then the Pound could experience a fresh boost against its rivals.
Commentary from Bank of England (BoE) policymakers could also move markets as further dovishness would dent the appeal of the Pound.
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TAGS: Daily Currency Updates Pound New Zealand Dollar Forecasts