The Pound started the week on a low note against the New Zealand Dollar, with the latest EU Referendum argument dampening investment in the UK currency.
Conversely, the New Zealand Dollar has been rallying amid bets that the Federal Reserve will hold off hiking interest rates again until after the EU referendum, with many analysts taking a June adjustment off the table.
This latest movement follows last week’s significant GBP/NZD volatility. The Pound rose from 2.1119 to hit a multi-month high of 2.1738 by the middle of the week; although profit taking did push Sterling back to 2.1434 before the weekend.
Pound Fluctuates on EU Referendum Forecasts
The Pound has been an unstable option lately and while it opened the week on a low note against most of its rivals, it has since appreciated in most cases. Against the New Zealand Dollar, however, Sterling has remained low due to the latter currency’s current strength.
The Pound’s initial shortcomings were a symptom of the news that the Treasury was predicting a year of recession in the UK after a ‘Brexit’. As with previous treasury forecasts, this has been accompanied by a lengthy document that details the formulas and equations used to come to such a conclusion.
One of the ‘Brexit’ predictions that may have gone some way to supporting the Pound may have come from NHS Chief Executive Simon Stevens, who argued that the service would be financially worse off if the UK left the EU. This assertion directly contradicts ‘Leave’ campaign claims that the NHS would be ‘saved’ by a ‘Brexit’.
New Zealand Dollar Soars after Fed Rate Hike Questioned, Cooler NZ Inflation Called For
The ‘Kiwi’ has enjoyed a modest rally recently against Pound Sterling and all of its other major peers.
Sources of support for the New Zealand Dollar have been threefold; in the first instance, the price of class 3 milk per hundredweight has risen recently, while in the second, despite hawkish comments from Fed official Eric Rosengren, the general consensus is that the Fed won’t raise interest rates in June.
Finally, a calming commentary offered by former Reserve Bank of New Zealand Governor Don Brash may also have boosted the appeal of the ‘Kiwi’, due to the former Governor stating that the RBNZ should not be overly fixated on hitting the current 2% inflation rate target.
GBP/NZD Exchange Rate Forecast
Over the current week, Pound Sterling/New Zealand Dollar exchange rate movement may occur as a result of tomorrow’s New Zealand trade balance data, which is expected to show a dip from a surplus into a deficit.
Later in the week, Thursday will provide the main UK reports, consisting of the business investment result for the first quarter, along with the mixed forecast GDP growth figures for the same period.
Heads Up
Summary of major upcoming data releases that we think may move the market.