Pound New Zealand Dollar (GBP NZD) Climbs Despite IMF Downgrading UK Growth

July 24, 2017 - Written by Tim Boyer

STORY LINK Pound New Zealand Dollar (GBP NZD) Climbs Despite IMF Downgrading UK Growth

The Pound to New Zealand Dollar exchange rate has regrouped since last week’s slide, climbing to 1.7561 today despite the international monetary fund (IMF) downgrading its UK growth forecast.

The IMF announced that it expects the UK economy to grow by 1.7% in 2017, a drop from the previous estimate of 2%.

The forecast for next year remains stable at 1.5%.

Sterling has remained unperturbed however, brushing off the the IMF’s downgrade as the Government claims that strong employment levels and continually falling unemployment levels signify that the UK economy is strong.

UK US Trade Discussions Begin, GBP NZD Bolstered

UK US trade discussions have officially started today, with the UK looking to sketch up the details of a post-Brexit trade agreement across the pond that could eventually net an extra $50Bn by 2030.

Responsible for the preliminary talks; International Trade Secretary Liam Fox, and US counterpart Robert Lighthizer, with US President Donald Trump expressing his approval, stating that he expects a ‘powerful’ trade deal to be completed ‘very quickly’.

The Department for International Trade described the goal of the talks to be in:

‘…providing certainty, continuity and increasing confidence for UK and US businesses as the UK leaves the EU’.

Meanwhile Tory MP Ben Bradley expressed delight to see an ‘…ever-growing list of nations that want to trade with us post-Brexit and the doors that can be opened as a result’.

Speed may be a slight problem, however, as officially the UK cannot sign a trade deal with the US until they have left the European Union – something that is due to take place by the end of March 2019. Nonetheless, there is nothing preventing discussions – and with Liam Fox and Boris Johnson both abroad discussing trade deals, confidence in the long-term future of Sterling has briefly reassembled.

RBNZ May have to Cut Interest Rates to Boost Inflation

Last week it was announced that consumer prices in New Zealand only increased some 1.7% year-on-year in 2017’s second quarter, below market forecasts of 1.9% and indeed down 2.2% from the previous period (the highest one in five years). Softer growth in housing prices, utilities, transport and a more severe decline in communication cost was primarily responsible.

BNZ research head Stephen Toplis suggested the possibility that the RBNZ may have to start considering lowering its forecasts for future inflation ‘by a reasonable amount.’
Toplis continued:

‘If you looked at it purely in terms of the inflation target, then there would certainly be some argument for pushing interest rates lower.’

This sentiment, as well as last week’s demonstrated drop in inflation levels may well have driven demand away from the ‘Kiwi’ Dollar, especially as the Australian Dollar (AUD) is currently looking like a far more viable prospect.

GBP NZD Forecast: New Zealand Trade Balance and UK GDP on the Horizon

New Zealand’s trade data is coming in on Tuesday the 25th of July and will be the most significant release this week for the New Zealand Dollar.

If the trade surplus narrows then the Pound may well continue to climb against the New Zealand Dollar, especially as tomorrow is another quiet data calendar day for the UK.

UK GDP growth is currently predicted to have decelerated from 2% year-on-year to 1.9%. If this occurs then the GBP NZD pairing will likely come under pressure, as it may push the Bank of England (BoE) away from hawkish rhetoric.

Current Interbank GBP NZD Exchange Rates

At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.7545 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5693.

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