The Pound opened trading this week in a comparatively strong position against the New Zealand Dollar, rising by 0.5%. Despite this, the Pound’s general outlook for the week is negative in light of the upcoming events.
Last week, the Pound to New Zealand Dollar exchange rate improved slightly from 1.74 to 1.75.
Pound Rises as Traders Bank on Article 50 Amendment
The Pound’s advance against the New Zealand Dollar today comes as the nation teeters on the edge of officially starting the Brexit process.
The Pound’s gains against the New Zealand Dollar today are partly due to optimism that the House of Commons will approve two amendments to Article 50.
While the chances of Commons approval today are slim, if the amendments are passed the UK’s negotiations may take a different turn than they otherwise would.
Raising the odds for a Commons rejection, however, has been Brexit Secretary Davis Davis, who has warned that the Prime Minister would be going into negotiations with ‘one hand tied behind her back’ if either amendment is approved.
New Zealand Dollar Weakened by Predicted US Rate Hike
The New Zealand Dollar’s faltering start this week has largely been caused by expectations that the Fed will raise the US interest rate on Wednesday.
Given how unexpectedly good last week’s US jobs figures were, the chances of a rate hike have been bumped up to over 95% this week, compared to odds of30-40% at the start of the month.
A US interest rate hike could strengthen the US Dollar and weaken higher-risk currencies like the ‘Kiwi’.
GBP/NZD Exchange Rate Forecast
This week, Pound Sterling/New Zealand Dollar exchange rate movement may occur as a result of the triggering of Article 50, which could come on Tuesday or Wednesday.
Additional Pound movement on Wednesday could come from UK jobs figures, while Thursday will see the Bank of England (BoE) make its March interest rate decision.
UK earnings figures on Wednesday are forecast to show slowing wage growth, so may pile pressure on the Pound.
The Bank of England (BoE) event could also weaken Sterling, given that officials may offer a pessimistic outlook for the UK as Brexit negotiations kick off. No change is expected from the current UK interest rate of 0.25%.
Notable NZ data will be limited to Wednesday’s Q4 GDP stats, which are forecast to show slowing growth; this may not be enough to allow a GBP NZD rise, given the number of other factors that may be damaging the Pound.