June 11, 2018 - Written by John Cameron
STORY LINK Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as UK Production Slumps
The Pound New Zealand Dollar (GBP/NZD) exchange rate is on the back foot at the start of this week’s session as markets react to some abysmal UK economic data.
Pound (GBP) Tumbles as UK Industrial Production Plummets
After initially ticking higher at the very start of the week’s session, the Pound New Zealand Dollar (GBP/NZD) exchange rate has pulled back, following the release of some disappointing UK trade and production data.
According to figures published by the Office for National Statistics (ONS), UK’s trade deficit unexpectedly swelled from -£3.22bn to -£5.28bn in April, a significant departure from forecasts that the deficit would instead narrow to -£2.5bn.
It is the accompanying industrial production figures which are likely to have most negatively impacted the Pound however, with the ONS reporting that factory output nosedived from 0.1% to -0.8% at the start of the second quarter.
Some analysts suggest the growing fears of a potential trade war could also be negatively impacting the UK’s trade prospects.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC) said:
‘The deterioration in the UK’s trade position in April is a concern and means that the UK’s trade deficit remains significantly higher than the historical average. This deterioration largely reflects a marked decline in exports in the month.
It is possible that the UK is now moving past the recent sweet spot for exporters, with growth in key markets moderating and the impact of the post-EU referendum slump in Sterling, which has helped some exporters, subsiding. The possibility of an escalating trade war has added to the downside risks for exporters.’
New Zealand Dollar (NZD) Stable as Markets Await US-North Korea Summit
Meanwhile the New Zealand Dollar (NZD) is trading in a narrow range against the majority of its peers this morning as investors await the outcome of a historic summit between US President Donald Trump and North Korean leader Kim Jong.
The meeting is set to take place in the early hours of Tuesday morning at a resort in Singapore and all eyes will be on whether the two leaders will be able to smooth relations between the US and North Korea.
While observers remain optimistic, there remains a chance that the summit will fail to quell tensions in the region, and outcome which is likely to drag on the New Zealand Dollar which remains highly sensitive to any geopolitical uncertainty.
GBP/NZD Exchange Rate Forecast: Markets Look to UK inflation Figures for Possible Uptick in Sterling
Looking ahead the GBP/NZD exchange rate may quickly rebound over the coming days as the UK’s gears up to publish some even more impactful economic data.
This will begin with the release of the UK’s latest employment data, with the Pound potentially strengthening if UK wage growth remains robust in April.
However it’s likely to be the UK’s latest Consumer Price Index (CPI) which really drives any recovery in the Sterling exchange rate this week as economists forecast the UK’s inflation rate will have ticked back up to 2.5% in May.
Meanwhile it’s set to be a quiet session in terms of New Zealand economic data this week, however this is not to say the New Zealand Dollar (NZD) won’t see some significant movement throughout the week.
Rather than domestic data, NZD investors are instead likely to pay attention to events in the US, particularly an expected rate hike from the Federal Reserve on Wednesday, which could prompt notable volatility in the ‘Kiwi’ especially if a hawkish outlook from the Fed causes market risk appetite to pull back.
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TAGS: Pound New Zealand Dollar Forecasts