The Pound made a strong recovery last week and is bullish today, with GBP NZD exchange rates up 0.6% in the region of 1.7419.
UK Monetary Policy Outlook Strengthens; New Zealand Forecasts Remain Dovish
Hawkishness from Bank of England (BoE) policymaker Kristin Forbes boosted the Pound on Monday. The Monetary Policy Committee (MPC) member said in a speech that;
‘In my view, if the real economy remains solid and the pick-up in the nominal data continues, this could soon suggest an increase in the bank rate.’
Her comments built upon suggestions in the latest MPC meeting minutes that some policymakers were becoming unsettled by the surging pace of inflation. GBP NZD rose as investors priced-in higher odds of monetary tightening.
The ‘Kiwi’ resisted further depreciation on Tuesday following a 1.3% rise in dairy prices at the latest auction. However, forecasts later in the week from the Reserve Bank of New Zealand (RBNZ) Governor that New Zealand’s official cash rate would remain frozen at 1.75% for a ‘considerable’ period helped Sterling extend gains even further.
Above-Forecast UK Industry Data Continues Boosting Pound as GDP Outlook Improves
The Pound New Zealand Dollar exchange rate is currently making bullish gains following Friday’s strong UK industry data. Investors are reacting to the improved economic outlook for the UK, buying Sterling on the expectation that 2016 Q4 growth figures may be revised up to 0.7% on the quarter.
Meanwhile, the New Zealand Dollar is hampered by weak risk demand. Markets are once-again experiencing a ‘Trump bump’, as expectations rise that the US President will soon outline his sweeping tax reform plans. This is causing the Bloomberg commodity indices to trend below opening levels.
GBP NZD Forecast; UK CPI Growth Could Boost Pound on Building Rate Hike Odds
UK data kicks off with tomorrow’s consumer price index data for January. Economists are predicting another strong rise in inflation, with overall price growth likely clocking in just ten basis-points below the Bank of England’s (BoE) target. Despite recent dovish forecasts for inflation this quarter from the BoE, it is likely that another strong rise will seriously boost trader expectations of a rate hike.
Wednesday’s average weekly earnings data, which comes alongside the latest initial and continuing jobless claims figures, could unsettle investors if it shows that wage growth remains sluggish.
Friday’s retail sales data will be the latest UK data before the weekend.
Meanwhile, it’s a very light week in terms of New Zealand data. Today’s REINZ house sales and foods prices data will have to tide investors over until Thursday, where the week’s docket closes with ANZ consumer confidence figures for February, the Business NZ performance of manufacturing index for January and the 2016 Q4 retail sales excluding inflation.