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GBP to NZD Exchange Rate Surges to New 2017 Highs

April 26, 2017 - Written by David Woodsmith

An increase in risk-sentiment at the beginning of this week didn’t last long, as news from the US and underwhelming commodity trade made markets quickly risk-averse again. As a result, the Pound to New Zealand Dollar exchange rate has easily advanced.

GBP/NZD began this week trading at the level of 1.82. On Tuesday the pair soared and by Wednesday’s European session it had reached a high of 1.85 – its best levels since August 2016.

Sterling demand has been generally firm. Investors remain optimistic that UK Prime Minister Theresa May will extend her Conservative party’s Parliamentary majority, potentially giving her more room to put through her Brexit plans smoothly.

Tuesday’s UK data was mixed however. UK public sector net borrowing was worse in March than projected, coming in at £-4.36b rather than the projected £-1.5b.

On the other hand, UK public borrowing throughout the 2016/2017 financial year was the lowest level for borrowing since the financial crisis.

Borrowing also met UK government targets for the year, but another downside is that most analysts expect borrowing to worsen again in the coming financial year.

Most of GBP/NZD’s gains this week have been due to New Zealand Dollar weakness.

Investors have sold off the risky New Zealand Dollar due to rising concerns that the US Trump administration may continue to get stricter on global trade and become more protectionist.

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On Tuesday, the US government announced it would put stricter trade tariffs on softwood lumber imported from Canada, which damaged support for currencies from trade-heavy nations.

Expectations from markets that US President Donald Trump will finally go into more detail on his plans for tax changes on Wednesday has also weakened market appetite for risk.

If Trump’s tax plans are indeed announced and they impress or shock investors, it’s likely the New Zealand Dollar will perform poorly until the end of the week and allow GBP/NZD to continue advancing.

However, any further indication that the Federal Reserve may slow its pace of US interest rate hikes will leave markets looking to currencies like the ‘Kiwi’ for yields, which is a possible upside factor for the currency this week.

Friday’s session will see the publication of Britain’s highly anticipated Q1 Gross Domestic Product (GDP) projections. They’re expected to improve from 1.9% to 2.2% year-on-year but slip from 0.7% to 0.4% quarter-on-quarter.

Even if they disappoint investors though, the Pound to New Zealand Dollar exchange rate is on track to register gains this week after Tuesday and Wednesday’s big gains.

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TAGS: Currency Predictions Pound New Zealand Dollar Forecasts

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