Pound New Zealand Dollar Forecast: GBP/NZD Exchange Rate Fell in Rocky Week as Brexit Outlook Weighed on Sterling

GBP/NZD Exchange Rate was on Volatile Form as Trade War Fears Saw Markets Forecast Gloomy Post-Brexit Situation, Weakening Pound Sterling

The GBP/NZD exchange rate has been able to recover from this morning’s losses to hover around opening levels, despite a mixed result from Philip Hammond’s Spring Budget Statement.

The Chancellor of the Exchequer remained upbeat about the outlook for the UK economy, despite the Office for Budget Responsibility (OBR) barely changing its economic forecasts and predicting that the additional strain placed upon the Budget after Brexit would more-than outweigh the savings made by divorcing the European Union.

GBP/NZD Exchange Rate Left on Volatile Form as Trade War Fears See Markets Forecast Gloomy Post-Brexit Situation, Weakening Pound Sterling

The past seven days have seen the GBP/NZD exchange rate on turbulent form as fears of a global trade war weighed on both Pound Sterling and the New Zealand Dollar.

The outlook for the UK economy post-Brexit was – unsurprisingly - in sharp focus last week, with GBP weakened on Tuesday by a warning from car maker Vauxhall that uncertainty surrounding the UK’s split from the European Union could threaten its Port Ellesmere plant, which currently employs around 1,800 people.

Pound weakness continued for much of Wednesday after European Council President Donald Tusk rejected the post-Brexit trade agreement framework proposed by UK Prime Minister Theresa May after intensive talks with leading figures in her Brexit Cabinet.

The Pound was able to regain losses against the New Zealand Dollar in the afternoon after a strong US ADP employment report.

Friday followed up with a strong US non-farm payrolls report, but markets judged that the data would not actually improve the monetary policy outlook for the US, pushing the GBP/NZD exchange rate down to a new weekly low.

Turbulent Trading for GBP/NZD Exchange Rate as US Metals Tariffs See Economists Forecast Global Trade War

Last week the US government took steps towards implementing tariffs on imports of steel and aluminium; a development that boded ill for the economic outlook of both the UK and New Zealand, thus keeping the GBP/NZD exchange rate fluctuating wildly as market assessment of who was the most at risk kept changing as the days progressed.

US metals tariffs are concerning for the UK as they represent the step towards protectionism at a time when the UK government is hoping to forge a comprehensive trade deal with the United States following Brexit.

Meanwhile, the commodity-correlated New Zealand Dollar was unsettled by predictions that major world powers such as China and the European Union may respond to the US with tariffs of their own, sparking a global trade war that sees appetite for imports dwindle.

As an export-based economy, New Zealand clearly has much to fear from this kind of dispute.

GBP/NZD Exchange Rate Undermined as Prospect of Peace Talks in Korea and Weak US Wage Growth Boost New Zealand Dollar

Although global trade war fears weighed on the New Zealand Dollar last week, the GBP/NZD exchange rate has seen some sharp losses over the past seven days.

Tuesday saw the New Zealand Dollar boosted after it was announced that North Korea and South Korea would meet in April for an historic summit aimed at strengthening relations between the two countries who have been in a state of stalemate since the Korean War ended in 1953 with no formal peace treaty.

This saw investors feeling much more confident in the state of global affairs and so the high-yield New Zealand Dollar benefited as markets began emerging from safe-haven assets.

Then, towards the end of the week, the New Zealand Dollar received a sharp boost from weaker-than-expected wage growth figures in the US, which dampens the inflation outlook and therefore the outlook on monetary policy.

Empty UK Data Calendar Forecast to Keep GBP/NZD Exchange Rate Vulnerable as New Zealand GDP Report Approaches

With the UK data calendar for this week entirely devoid of eco-stats, the GBP/NZD exchange rate could be stuck on soft form as markets focus on Brexit and the approach of high-impact New Zealand data.

Wednesday’s New Zealand gross domestic product figures for the fourth quarter of 2017 are expected to show a solid uptick in the pace of growth, with quarter-on-quarter expansion accelerating from 0.6% to 0.8% and year-on-year growth rising from 2.7% to 3.1%.

The Pound Sterling to New Zealand Dollar exchange rate could therefore see strong losses midweek, although the glut of US data on Thursday and Friday could threaten to overwhelm the sparser offerings from New Zealand and therefore pressure NZD lower.

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons