The global growth outlook, commodity prices and ‘Brexit’ arguments have all been significant drivers of GBP/NZD exchange rate volatility over the past seven days.
NZD Boosted as Positive Chinese Data Eases Global Concerns
New Zealand data has been fairly sparse recently, although strong releases from China have boosted the ‘Kiwi’. Although Chinese GDP contracted as expected, strong production, retail sales and investment figures eased global fears about the Chinese slowdown. Greater confidence in the economy raised investor hopes for more lucrative trade with New Zealand.
However, seasonally-adjusted Chinese GDP figures released on Saturday caused the New Zealand Dollar to slump after showing a greater-than-expected drop from 1.6% to 1.1%.
On a domestic front, the ‘Kiwi’ received a boost on Sunday from the latest Consumer Price Index figures, which showed that inflationary pressures were building. Year-on-year (YoY) prices saw growth accelerate from 0.1% to 0.4% as predicted, while quarter-on-quarter (QoQ) inflation left contraction territory and rose past the 0.1% forecast to 0.2%.
The ‘Kiwi’ recovered on Tuesday after the latest GlobalDairyTrade auction yielded a rise in prices.
Pound Gains as ‘Remain’ Campaign Position Strengthens
As predicted, the Bank of England (BoE) left interest rates on hold at its latest meeting, although its monetary policy statement weakened the Pound as it suggested that uncertainty generated by the referendum had already had a negative effect on the UK economy.
The referendum has continued to be a key driver of the GBP/NZD exchange rate over the past few days. The Treasury released a 200-page ‘Brexit’ forecast on Monday, detailing its predictions for the UK after a split from the European Union. The ‘Leave’ campaign scoffed at George Osborne’s warning that the UK economy could be -6% smaller in the event of a ‘Brexit’ by 2030 compared to growth if the UK remains part of the European Union.
The ‘Remain’ campaign benefited after the latest telephone polling figures showed that it had a 9% lead against the ‘Leave’ campaign, while pro-EU supporters seized upon the fact that ‘Brexiters’ have refused to release a forecast or analysis for the UK economy if the UK chooses to leave the EU.
Today’s disappointing Jobless Claims Change and Unemployment Change Figures, coupled with a slowdown in wage growth, have failed to dent the Pound’s bullishness against the New Zealand Dollar.
GBP/NZD Forecast: ‘Kiwi’ Could Weaken Ahead of RBNZ Rate Decision
Data for New Zealand is relatively light over the coming seven days, with only credit card spending and trade balance figures due, on Thursday and Tuesday respectively. However, with a monetary policy meeting by the Reserve Bank of New Zealand (RBNZ) scheduled for Wednesday, speculation could drive GBP/NZD in the preceding days.
The ubiquitous ‘Brexit’ argument will likely continue to drive sentiment towards the Pound over the coming days. Tomorrow’s retail sales and trade balance figures may provide additional momentum, while Wednesday’s GDP figures promise significant volatility.
Heads Up
Summary of major upcoming data releases that we think may move the market.