April 25, 2019 - Written by Ben Hughes
STORY LINK GBP to NZD Exchange Rate Slips Back from 2019 Best amid Lack of Strong Pound Support
Demand for the Pound was not strong enough to help keep the British Pound to New Zealand Dollar (GBP/NZD) exchange rate near its best levels today. As the New Zealand Dollar was bought back from its worst levels following weeks of poor performance, the Pound lacked any solid domestic support due to lasting UK political and Brexit uncertainties.
Still, GBP/NZD is on track for another week of gains due to this week’s latest risk-off movement. The New Zealand Dollar is a currency often correlated to trade and changes in risk-sentiment, so risk-off helped to boost GBP/NZD from 1.9339 to 1.9334 last week, and even higher to near the level of 1.9536 this week.
GBP/NZD has been unable to hold the high of 1.9612 seen yesterday evening. This was the best level for GBP/NZD all year, since October 2018.
GBP Exchange Rates Lack Drive to Hold Best Levels amid Brexit Jitters
For most of the week so far, the Pound has been driven higher by weakness in its rivals, despite a lack of strong support or demand for the British currency itself.
Instead, Sterling’s potential for gains has been generally limited by concerns that the Brexit process is still in for months more uncertainty, which means months more uncertainty for British businesses and the economic outlook.
While UK consumers have shown signs of resilience despite the Brexit uncertainties, the Pound’s strength recently has been limited as there has been no news that has solidly improved the Brexit outlook.
Instead, Pound volatility has fallen and the British currency is fluctuating within a relatively narrow region, being driven more by movement in rivals.
This week’s political developments have done little to make the Pound more appealing either, with reports emerging that UK Prime Minister Theresa May is under pressure to step down sooner rather than later worsening concerns of a hard-Brexit supporting Prime Minister or a general election.
Sterling was sold from its best levels today, even despite some stronger than expected UK retail data from the Confederation of British Industry (CBI).
According to Rain Newton-Smith, Chief Economist at CBI:
‘It’s encouraging to see retailers with more of a spring in their step than in recent months,
The recent pick up in real wages is a welcome support to the sector, making the Pound in people’s pockets stretch that bit further.’
NZD Exchange Rates Rebound Slightly from Worst Levels but Pressure Remains
The New Zealand Dollar has been broadly unappealing in recent weeks, and nothing major has changed to make the currency more appealing today.
As New Zealand data continues to fall well short of expectations and there are stronger signs that global economic growth is suffering a slowdown, Reserve Bank of New Zealand (RBNZ)
interest rate cut bets have risen and markets now expect a cut as soon as next month.
This week’s news and data has done little to change that, with further signs of slowdown in other nations like Australia and Canada making investors hesitant to take risks by buying trade-correlated currencies.
Instead, the latest rise in demand for the New Zealand Dollar is more of a profit-taking rebound from the currency’s worst levels.
An interest rate cut from the RBNZ is now largely priced in, which means further losses for the ‘Kiwi’ could be limited after weeks of falls. Some investors are adjusting positions and buying the currency while it’s undervalued.
GBP/NZD Exchange Rate Forecast: New Zealand Trade Balance Report Ahead
The Pound to New Zealand Dollar exchange rate is on track to end the week higher, but if Friday’s data surprises investors the pair could still be in for a late-week drop.
Friday’s Asian session will see the publication of this week’s most notable New Zealand data, the March trade balance. ANZ will also publish its April New Zealand consumer confidence report.
It would take a particularly impressive trade report to soften Reserve Bank of New Zealand (RBNZ) interest rate cut bets, but the New Zealand Dollar could still benefit if the data beats expectations.
As for UK data, Friday will see the publication of CBI’s latest UK business optimism and factory figures.
If they beat expectations the Pound could see a little late-week strength, but Brexit uncertainties are likely to keep a lid on the Pound to New Zealand Dollar exchange rate’s potential for gains.
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TAGS: Pound New Zealand Dollar Forecasts