New Zealand Dollar Forecast: GBP/NZD Surges Over a Cent before Dairy Auction

Update: GBP/NZD Exchange Rate Rallies as Sterling Broadly Strengthens

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate jumped by over a cent on Monday as Sterling was supported by some positive domestic manufacturing data and hopes for Prime Minister Theresa May’s Brexit plans.

However, the New Zealand Dollar recouped some losses overnight as the ANZ activity outlook and business confidence indexes showed improvement.

The GBP/NZD exchange rate could also slide later today if the latest Global Dairy Trade auction shows an increase in the price of New Zealand’s key commodity.

New Zealand Dollar Forecast: NZD Exchange Rates Strengthen on Finance Minister Grant Robertson Comments

Comments from New Zealand Finance Minister Grant Robertson offered support to New Zealand Dollar (NZD) exchange rates ahead of the weekend as he expressed satisfaction with the relative strength of the currency.

This bolstered hopes that the new centre-left coalition will not put pressure on the Reserve Bank of New Zealand (RBNZ) to intervene, limiting the prospect of an interest rate cut.

In the wake of the announcement that well-respected former central banker Adrian Orr had been appointed as the new RBNZ Governor this offered further reassurance to investors.

A solid uptick in the November services PMI also put pressure on the GBP NZD exchange rate on Monday, pointing towards the underlying resilience of the New Zealand economy as the sector continued to expand at a solid rate.

GBP Volatile Despite Brexit Process Progress

Confidence in the Pound, meanwhile, has remained rather muted thanks to the latest Brexit-based developments.

With Theresa May and her Cabinet set to discuss the shape of the UK’s future relationship with the EU for the first time this week this has encouraged fresh volatility for Sterling.

Even so, as EU leaders agreed on Friday that talks can finally proceed to their next phase the GBP NZD exchange rate was able to recover some of its lost ground and pull away from its recent lows.

However, with Chief EU negotiator Michel Barnier still adamant that the UK will not be able to achieve a bespoke trade deal the potential for fresh Pound weakness is likely to persist over the coming months.

Further New Zealand Dollar Gains Possible on Export Uptick

The New Zealand Dollar may struggle to sustain its stronger footing for long, though, with a fresh raft of domestic data set for release in the days ahead of Christmas.

November’s trade figures could prompt another NZD exchange rate rally, however, with forecasts pointing towards a modest uptick in exports on the month.

As long as the economy demonstrates further signs of shaking off the initial negativity that greeted the recent change in government this should limit the downside vulnerability of the ‘Kiwi’.

On the other hand, the third quarter gross domestic product report is expected to show a slight loss of momentum on the quarter.

Any uptick in market risk aversion could also put pressure on the antipodean currency, with investors bracing for the latest US tax reform developments.

Rising UK Government Borrowing to Dent GBP NZD Exchange Rates

Brexit is likely to dominate the outlook of GBP exchange rates in the near future, especially as the Conservative government’s approach to its future trading relationship with the EU becomes clearer.

If ministers continue to favour a harder form of exit this could weigh heavily on the Pound, although a significant degree of downside has already been priced into the currency at this stage.

December’s GfK consumer confidence index is expected to hold steady at -12, meanwhile, which is unlikely to offer the GBP NZD exchange rate particular support.

The latest public sector finance data may also dent the appeal of Sterling, unless the accumulation of new government debt is shown to have eased in the last month.

As it stands, the GBP NZD exchange rate looks set to struggle to gain any significant traction ahead of the festive season.

Data Affecting This Week’s GBP NZD Exchange Rate Forecast

19th December 21:45 NZ Trade Balance (NOV)

20th December 02:00 NZ Credit Card Spending (YoY) (NOV)

20th December 13:15 UK Bank of England Governor Mark Carney Speaks in London

20th December 21:45 NZ Gross Domestic Product (YoY) (3Q)

21st December 00:01 UK GfK Consumer Confidence (DEC)

21st December 09:30 UK Public Sector Net Borrowing (NOV)

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon