The Pound has recorded modest gains against the New Zealand Dollar today, but could experience turbulence ahead of Thursday’s general election vote.
Last week, the Pound lost around two cents against the New Zealand Dollar as comparatively positive UK data failed to lift Sterling in the face of ongoing political jitters.
GBP to NZD Higher despite UK Services Slowdown
The Pound’s cautious gains against the New Zealand Dollar come after the UK services PMI for May was announced. This showed a dip in sector activity in May, with the index falling from 55.8 points to 53.8.
This was a three-month low and a worse result than forecast. The decline was partly blamed on political uncertainty ahead of the election.
Other UK news has seen new car sales slow by -8.5% on the year in May. According to Society of Motor Manufacturers and Traders head Mike Hawes, this could be an election-related slump;
‘We expected demand in the new car market to remain negative in May due to the pull-forward to March resulting from VED reform. Added to this, the general election was always likely to give many pause for thought and affect purchasing patterns in the short term’.
Today’s Pound to New Zealand Dollar advance follows a Guardian/ICM election poll, which puts the Conservatives on 45 points and Labour on 34. Although this 11 point lead is down significantly from the 20 point lead the Conservatives were commanding initially, it puts PM Theresa May much further ahead than other recent polls.
New Zealand Dollar Tumbles ahead of US Visit
Demand for the New Zealand Dollar has dropped today as economists consider an upcoming visit to New Zealand from US Secretary of State Rex Tillerson.
Tillerson will be meeting with NZ Prime Minister Bill English, but some are concerned that the US protectionist agenda may leave NZ out in the cold.
If Tillerson does speak on ‘renegotiation’ of ties instead of ‘renewal’ the New Zealand Dollar could fall.
GBP/NZD Forecast
This week, Pound/New Zealand Dollar exchange rate movement will largely occur as a result of Thursday’s UK general election vote, with UK production, construction and trade stats unlikely to have much of an influence on Friday.
Dramatic Pound movement could occur when exit polls and constituency declarations start to trickle in. If it looks like the Conservatives are set for a landslide win, the Pound could rally.
Conversely, anything less than an absolute Tory victory is liable to send Sterling reeling.
The aftermath of the vote will dominate trader focus on Friday, with the UK’s ecostats taking a back seat.
The reports set for release include April’s trade balance and construction output figures. In normal circumstances a trade deficit reduction could boost the Pound.
This week’s NZ news will include the Global Dairy Trade price index and Q1 manufacturing sales stat, both due on Tuesday.
If global dairy prices rise then the NZD could rally, as such a result would benefit national milk exporters.