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2018 Spring Statement: GBP/NZD Exchange Rate Declines after UK Economic Update

March 13, 2018 - Written by Ben Hughes

On Monday’s trading session, the Pound to New Zealand Dollar exchange rate rose from a starting level of 1.8963 to close higher in the region of 1.9054.

There was little direct UK data to refer to, so GBP traders instead considered the spring statement which has come out today.

GBP/NZD Exchange Rate Update: Pound Dips against New Zealand Dollar despite Optimistic Spring Statement

The Pound has made a minor loss against the New Zealand Dollar today, following the highly-anticipated spring statement from Chancellor Philip Hammond.

Mr Hammond’s delivery was a broadly optimistic one, as the Chancellor revealed upgraded growth forecasts and estimates for lower inflation, debt and borrowing.

The statement event wasn’t entirely brimming with optimism, however, as a number of economists took the estimates with a certain degree of scepticism.

Among those holding off on celebrating was Deloitte Chief Economist Ian Stewart, who said;

‘We should not get carried away. These forecasts are likely to be no less fallible than earlier ones and, despite an improving trend in public borrowing, the burden of debt in the UK is still at its highest in over 50 years’.

NZD/GBP Exchange Rate Rises on Optimistic GDP Growth Forecast

The New Zealand Dollar has firmed against the Pound on 13th March, thanks to a positive pre-emptive forecast for Wednesday’s GDP growth rate figures.

A Reuters poll has brought positive predictions for GDP growth from a variety of sources, with the average expectation being 0.7% growth.

Dismissing the negative effects of the change of government last year, BNZ Bank economists said;

‘The economy, more generally, appears to have got through the news of the new government’.

GBP/NZD Exchange Rate Forecast: Sterling Losses possible on UK Inflation and Wages Upset

As the dust settles from today’s spring statement, Pound traders are already looking ahead to next week’s high-impact UK inflation rate and average earnings announcements.

Compared to this week’s main UK economic news being confined to one day, next week’s major data will be spread from 20th March to 22nd March.

UK data will consist of inflation rate stats on the 20th, earnings and unemployment data on the 21st and retail sales and a Bank of England (BoE) interest rate decision on the 22nd.

The inflation rate readings for February might unsettle the Pound to New Zealand Dollar (GBP/NZD) exchange rate, as economists are split over whether rates will rise or fall.

If inflation picks up then the Pound may also rise, because this could force the Bank of England (BoE) to consider raising UK interest rates.

Wage growth data out on Wednesday will be compared to any shift in inflation rates; higher inflation and slower wage growth will worsen conditions for UK consumers.

As it stands, forecasts are for no major change in wage growth in January, but a slight decline in unemployment.

Lower unemployment could pressurise employers into raising salaries, so the Pound to New Zealand Dollar could appreciate on such a result.

Rounding off the week’s UK data, retail sales growth will be reported on 22nd March.

The main event will be the later BoE interest rate decision, although policymakers aren’t predicted to adjust rates from 0.50%.

The BoE’s response to the recent spring statement will be the main factor to watch out for; the statement could be discussed by BoE Governor Mark Carney after the rate decision.

If Mr Carney agrees with today’s cautiously optimistic forecasts or suggests that the UK economy could grow beyond estimates, the Pound could rise sharply.

The rest of this week will be packed with NZ economic data, starting off with the Q4 current account out tonight.

The current account functions as a general health-check on a national economy; in this instance, the previous -4.68bn deficit is forecast to reduce to -2.4bn.

The New Zealand Dollar could appreciate on this result and further gains could come if Wednesday’s Q4 GDP growth rate stats rise as forecast.

Closing what may be a good week for New Zealand Dollar to Pound trading, Thursday’s NZ business PMI for February is also tipped to show higher economic activity.
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