The Pound is largely managing to cling to its recent highs against the New Zealand Dollar today despite a pessimistic prediction for UK economic performance from IHS Markit.
Last week, the Pound made decisive gains against the New Zealand Dollar, opening trading at 1.78 on Monday and closing at 1.82 on Friday – the GBP/NZD pairing’s best levels of 2017.
GBP/NZD Static on UK Economic Caution
The Pound’s lack of movement against the New Zealand Dollar today comes ahead of the release of key UK GDP growth figures at the end of the week.
Offering a pretty gloomy forecast has been IHS Markit Chief European and UK Economist Howard Archer;
‘Following the likely marked first quarter slowdown, we suspect that 2017 will become even more challenging for the UK economy, and particularly for consumers as their purchasing power is squeezed harder still’.
Although Pound movement has been more motivated by political news than economic releases in recent months, the pressure is on for UK economic data to buck the trend and show rising activity. If UK results fail to show a recovery, the Pound’s recent uptrend against the New Zealand Dollar could be swiftly reversed.
NZD GBP Advances despite Falling Consumer Confidence
The New Zealand Dollar has ticked up slightly against the Pound today, although this is mainly due to reduced demand for Sterling.
Recent NZ news has not been exactly NZD-supportive, with Friday’s ANZ consumer confidence score showing a drop.
But to put the dip from 125.2 to 121.7 in perspective, the ANZ report stated that the figure remained ‘above average and [not] like anything more than monthly ping pong’.
GBP/NZD Exchange Rate Forecast
This week, Pound/New Zealand Dollar exchange rate movement may occur in response to UK borrowing stats on Tuesday, house price data on Thursday and GDP growth data on Friday.
Government borrowing in March is forecast to show a deficit expansion on Tuesday, which may strip the Pound of any advantage over the New Zealand Dollar.
House price growth figures for April are forecast to show an annual dip but monthly rise, which may cause little overall Sterling movement.
However, in the wake of last Friday’s poor UK retail sales data, initial Q1 GDP figures may show a slowdown this Friday. This could significantly reduce Pound demand and send GBP NZD tumbling.
Outside of these direct announcements, the Pound may also be shifted by UK general election developments, especially if it looks like voters are leaning more one way than another.
The week’s main New Zealand ecostats include March’s trade balance figures and the ANZ business confidence score on Friday.
New Zealand’s balance of trade is forecast to improve considerably, with a deficit of -18m forecast to rise to a surplus of 370m. This may provide enough impetus for notable New Zealand Dollar gains.
US news could also influence New Zealand Dollar trading this week, as Donald Trump is expected to make a ‘big tax reform and tax reduction’ announcement on Wednesday.
Trump’s policy revelation could weaken the US Dollar if it seems unfeasible or ill-thought out, which would open the door for a New Zealand Dollar rise against the Pound.