GBP NZD Exchange Rate Rises as Conservative-DUP Deal is Signed

June 26, 2017 - Written by Toni Johnson

STORY LINK GBP NZD Exchange Rate Rises as Conservative-DUP Deal is Signed

Sterling’s recent advance still leaves GBP in a weak position, having only posted the best rate since June 21st.

Pound Heads Up after DUP Deal is Finally Agreed

The GBP NZD exchange rate has advanced today, thanks to a long-awaited government announcement.

The Conservatives and Democratic Unionist Party (DUP) have finally reached an agreement, resulting in the formation of a working government.

This comes over two weeks after the 2017 general election concluded and properly gives the UK a functional, decision-making body in charge.

It is worth remembering that the new government is not out of the woods yet, however. This week will see the Queen’s speech presented to parliament for a vote. The DUP are expected to support the measures contained within as part of their agreement, but this still leaves uncertainty in the House.

If confidence in Theresa May is lacking significantly, then she could theoretically face a Queen’s speech rejection, which would throw the UK into high turmoil.

Given that it could risk another election or something similar, the Pound would likely crash on the news.

NZD Drop Triggered by Alarming Rise in NZ Construction Costs

The day’s New Zealand Dollar losses have been brought about by a damning indictment of the national construction industry.

Due to a small pool of construction workers, wages and fees are skyrocketing. This labour shortage is having negative impacts on a variety of areas, not least on housing prices.

With an insufficient number of construction workers available, fewer houses are being built. This in turn bumps up prices on the existing housing stock, which has contributed to fears of a market bubble.

As well as fewer workers meaning less activity, high costs for work has further lowered sector activity.

According to Fletcher Building Chief Executive Mark Adamson, the problem is simple – ‘There’s just not enough people to go around’.

Adding to the sense of alarm has been ANZ Chief Economist Cameron Bagrie;

‘The problem is [that] we've got capacity constraints. Good luck trying to find people to build the houses’.

GBP NZD Forecast: High Turbulence Possible on BoE Stability Report

The next UK news to watch out for is due on Tuesday, consisting of the Bank of England (BoE) financial stability report.

The report could go two ways for the Pound. On the positive side, BoE Governor Mark Carney may concede that a UK interest rate hike may be necessary, raising hopes of a 2017 rate hike.

More negatively, the report could focus on the UK’s currently decreasing real incomes. Rising inflation and slow wage growth has contributed to this situation, which raises the chances of falling consumer spending in the future.

Offering a prediction on Carney’s comments has been The Guardian’s Shane Hickey;

‘[Carney] is likely to use the health check to highlight the problem of consumer debt burdens in the UK. With real incomes squeezed, households have been dipping into savings and maxing out their credit cards.

The Bank has raised its concerns about what this means for the broader financial system before, and could well use this update to flag the risks to the system if individuals overstretch themselves. Investors will be watching for any hints from the Bank on what it plans to do about rising consumer borrowing.

Carney is also likely to use the report to give himself and committee colleagues a pat on the back for the steps already taken by the FPC to rein in the mortgage market, which in turn give monetary policymakers scope to raise interest rates without inflicting too much harm on borrowers’.

Incoming New Zealand news will focus on the national trade balance for May. Recent forecasts have been pessimistic, for a surplus reduction from 578m to 420m. This result could weaken the NZD further against the Pound.

Further ahead, the other main NZ weekly news will be Thursday’s ANZ business confidence stats.

If the confidence index rises significantly in June, then the New Zealand Dollar may recover against the Pound.

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TAGS: Pound New Zealand Dollar Forecasts