GBP to NZD Exchange Rate Strength Limited by NZD Resilience

April 6, 2018 - Written by Ben Hughes

STORY LINK GBP to NZD Exchange Rate Strength Limited by NZD Resilience

Due to some disappointing UK data and a surprisingly resilient New Zealand Dollar, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate saw mixed movement over the past week despite Sterling’s strong performance against other majors like the Euro (EUR) and US Dollar (USD).

Last week saw GBP/NZD tumble from 1.9529 to 1.9344, and despite a brief climb to 1.9516 at the beginning of this week the pair spent most of the week slipping, even briefly hitting a half-month-low of 1.9192 on Thursday. At the time of writing on Friday, GBP/NZD was trending nearer the week’s opening levels again.

GBP Pressured by Underwhelming UK Data Despite Brexit and BoE Hopes

Resilience in New Zealand Dollar trade was enough to help the currency hold its ground against the Pound this week, as disappointing UK data limited its strength on Brexit and BoE optimism.

While Britain’s manufacturing PMI beat expectations towards the beginning of the week, the Pound was weakened towards the end of the week by other disappointing UK PMI stats and underwhelming UK labour productivity.

Britain’s key services sector slowed further than expected in March, due partially to unusually snowy and icy weather throughout the UK last month. The print slowed from 54.5 to 51.7.

The news left markets anxious that the Bank of England (BoE) may hesitate to hike UK interest rates if other upcoming data does not indicate that the drop in services was a blip rather than the beginning of a trend.

While economists have been more hawkish about lately than at any other point since the 2016 Brexit vote, some analysts still predict that there are downside risks in Pound trade.

According to Hans Redeker from Morgan Stanley in London;

‘The positive Brexit news has largely been priced in, and with the most challenging issue over Northern Ireland remaining unresolved, we view the balance of risks as increasingly negative,’

Friday saw the publication of Britain’s final Q4 labour productivity results, which came in at 0.7%. While this showed another quarter of growth, it fell short of 0.8% forecasts and did little to boost the Pound.

According to Tej Parikh from The Institute of Directors, productivity still has a ways to go before the so-called ‘productivity puzzle’ is solved;

‘While productivity growth has been near its strongest since the recession in recent quarters, it’s still too early to begin heralding this as the start of a new trend.

For starters, a drop-off in hours worked played a key role in pushing up the numbers, while all-important output growth has continued to be modest’

NZD Resilience Expected Despite US Trade Tariff Jitters

The New Zealand Dollar saw resilience against Sterling and other majors like the US Dollar (USD) over the past week, despite a lack of supportive New Zealand data and market trade jitters.

The New Zealand Dollar is a risky trade-correlated currency, which would typically be weakened by speculation that the US could spark a global ‘trade war’ with its protectionist trade tariff announcements.

However, as investors buy NZD back from recent lows and perceive New Zealand to be less likely to be impacted by trade concerns, the currency has been able to avoid major losses against Sterling.
According to Sean Keane from Triple T Consulting;

‘One advantage New Zealand does have over Australia is that its soft commodity exports to China and the United States are consumed in those local markets,’

GBP/NZD Forecast: Trade Developments and NZ Confidence Data in Focus

Next week’s UK economic calendar will be quieter, though Wednesday’s UK trade results and production stats could keep investors confident about the possibility of a May interest rate hike from the Bank of England (BoE) if they impress.

The New Zealand Dollar could be more influential to GBP/NZD exchange rate trade next week, if the Pound’s movement becomes limper.

New Zealand business confidence data will be published throughout the week and could influence New Zealand Dollar movement if it surprises.

On top of this, any developments on US trade stances could also influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate next week.

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TAGS: Pound New Zealand Dollar Forecasts