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GBP to NZD Exchange Rate Falls Back from Highs on Disappointing UK Sales Data

April 21, 2017 - Written by Tim Boyer

This week has seen significant gains in the Pound to New Zealand Dollar exchange rate, but the pair was unable to hold its weekly highs on Friday as the latest UK retail sales data came in well below expectations.

GBP/NZD began the week trending at the level of 1.7896 and on Tuesday the pair gained around three cents in value. The pair hit a 2017 high of 1.8321 on Thursday which was also its best level since August 2016. At the time of writing, GBP/NZD trended in the region of 1.8260.

The Pound was the main influence in GBP/NZD movement throughout the week. Sterling surged on Tuesday when UK Prime Minister Theresa May announced that there would be a snap general election on the 8th of June.

While the pair sustained its most major advances, it slipped from its best levels on Friday after the publication of Britain’s March retail sales stats which came in well below expectations.

UK retail sales were projected to drop from 1.4% to -0.2% month-on-month and from 3.7% to 3.4% year-on-year. However, sales instead plummeted to -1.8% and 1.7% respectively.

Due to March’s poor results, Britain’s overall Q1 retail sales figure came in at -1.4%. As consumer spending has been the main driver of Britain’s economic growth since the financial crisis, slowing consumer activity has left analysts suggesting that Britain’s economy will slow in 2017.

However, while Britain’s economic outlook is slightly lower, GBP investors are still more optimistic this week since the election news came in.

Investors are hoping that a bigger Parliamentary majority for Theresa May’s Conservatives party will lead to a smoother Brexit process. This has improved market expectations for long-term stability.

Comparatively, New Zealand Dollar investors haven’t had much to get excited about due to poor appetite for risk-correlated currencies.

While this week’s New Zealand Consumer Price Index (CPI) data was impressive, markets remain risk-averse due to poor commodity trade and high geopolitical tensions.

Next week’s economic calendar is also unlikely to change that much.

Britain’s economic calendar will be relatively quiet for most of the week, though Tuesday will see the publication of March’s public sector net borrowing results and Britain’s highly anticipated Q1 Gross Domestic Product (GDP) results will come in on Friday.

New Zealand’s economic calendar will be even quieter. Thursday will see the publication of New Zealand’s March trade balance update and ANZ’s business confidence results from April will come in on Friday.

Looking further ahead, New Zealand Dollar traders may become jittery as the 10th of May approaches with some analysts suggesting the Reserve Bank of New Zealand (RBNZ) may cut the nation’s interest rate in its next policy decision meeting.

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