Although the GBP/NZD exchange rate advanced above 1.88 last week (a multi-month high) the Pound has since dropped heavily against the New Zealand Dollar ahead of central bank announcements from the UK and New Zealand.
Pound Declines on ‘Hard Brexit’ Fears after French Election
Sterling’s dip against the New Zealand Dollar follows Emmanuel Macron’s landslide victory in the French Presidential election.
Although the result has left Euro traders reassured about the future of the EU, Macron’s pro-EU stance and attitude to Brexit has panicked Pound traders.
Macron’s desire to keep the EU intact is well known, and he has intimated that he won’t make it easy for the UK to break away. This means that his victory could increase the odds of the UK undergoing a so-called ‘hard Brexit’.
New Zealand Dollar Rallies as ASB Bank Predicts 3% Growth
The New Zealand Dollar has rallied today thanks to a general increase in risk-appetite and ASB Bank forecasts for national economic growth.
Bank officials predict that New Zealand will grow by 3% in 2017 and by 3.5% in 2018, even with slower tourist and construction activity.
Other banks have been less optimistic, but ASB’s prediction has lent NZD exchange rates support
GBP/NZD Forecast
This week, Pound/New Zealand Dollar exchange rate movement may follow recorded sales data for the UK and Thursday’s industrial production, trade balance and Bank of England (BoE) announcements.
With the Bank of England (BoE) interest rate decision being the week’s biggest news.
The BoE is forecast to leave rates on hold at 0.25%, but the tone adopted by central bank officials could still trigger a GBP NZD rally. If BoE commentary shows that rising inflation could encourage a sooner-than-forecast interest rate hike, the pound would climb.
That said, the UK is a month away from a general election, so the BoE may err on the side of caution to avoid ‘rocking the boat’ before the vote.
New Zealand’s main announcements will consist of the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday and a business PMI result on Thursday.
As with the BoE, the RBNZ is expected to leave interest rates untouched, but hints of a future rate hike from the RBNZ would send NZD exchange rates higher.