Although Sterling’s performance in the main has been on the negative side, the British currency has been able to advance against the New Zealand Dollar thanks to easing risk appetite and UK political developments.
The New Zealand Dollar, meanwhile, had an unstable opening to this week as Friday’s impressive US labour market figures continued shoring up Federal Reserve interest rate hike expectations – keeping demand for higher-risk currencies depressed.
Over the course of the previous week, the Pound endured a fairly steady few days of losses against the New Zealand Dollar, with GBP/NZD starting at a rate of 1.8458 and ending in the region of 1.7724.
Pound Soft as Conservative Leadership Contest Continued
High tensions over Thursday’s Bank of England (BoE) interest rate decision and the ongoing Conservative party leadership contest have kept the Pound pressured against most of its peers in recent weeks.
Subsequently, the Pound was able to firm on Monday when it was announced that Andrea Leadsom had dropped out of the race to be Conservative party leader, leaving Theresa May to take on the post of Prime Minister. The latest reports indicate that May could be in office within days.
In other political developments, Labour’s Angela Eagle has been gearing up to finally challenge Jeremy Corbyn for the party leadership.
New Zealand Dollar Dives on Rising Support for US Dollar
The value of the ‘Kiwi’ has been broadly lower following last week’s impressive US jobs data. With the US economy adding significantly more positions than forecast in June, the US Dollar rallied and its higher-risk rivals fell.
The US Non-Farm Payrolls report showed a massive 287k increase in positions, significantly more than the 11k positions added the previous month.
In domestic news, some fleeting support has come out of New Zealand in the form of news that electronic card spending rose considerably in June, from 0.3% to 1.2%.
GBP/NZD Exchange Rate Forecast
For the current week, Pound Sterling/New Zealand Dollar exchange rate movement may occur as a result of BoE commentary and New Zealand’s food price/business PMI reports.
In the former case, Tuesday is expected to bring the BoE’s quarterly bulletin, as well as a speech from Governor Mark Carney.
This will only be the tip of the economic iceberg for the UK, however, as Thursday will bring the BoE’s first interest rate decision since the EU Referendum.
Forecasts have been dovish in most areas; the general opinion is that the benchmark rate will be cut from 0.50% to 0.25% or even 0%. The Pound would likely dive in this outcome, despite the measure being designed to ease post-‘Brexit’ difficulties.
From New Zealand, input into the pairing’s exchange rate will come on Tuesday and Wednesday night, consisting respectively of the June annual food inflation result and the Business NZ PMI for the same month.
Forecasts have been for a slip in the PMI printing, along with a reprint at -0.3% for food inflation.