Downgrade to GDP Prompts Volatility in GBP/NZD Exchange Rate
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fluctuated heavily last week as some poor economic data from the UK and central bank rate bets prompted significant movement in the pairing.
The release of the UK’s latest employment and GDP figures were the main drivers of weakness in Sterling last week, with the uptick in unemployment and slower-than-expected growth both weighing on GBP.
However the Pound was able to rally in the second half of the week following rising speculation of a rate hike from the Bank of England (BoE) in the foreseeable future.
Meanwhile the New Zealand Dollar struggled last week due to a strengthening US Dollar and a decline in dairy prices.
Markets on the whole were unfazed by a sharp uptick in New Zealand’s fourth quarter retail sales figures, failing to react.
Sterling (GBP) Surges on BoE Rate Hike Hopes
The Pound is off to an extremely convincing start this week as markets have leapt on comments made by the BoE’s Deputy Governor, Dave Ramsden, in an interview over the weekend.
Speaking to the Sunday Times, Ramsden said:
‘Relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later.’
Seen by many as a dove, and being one of only a few members of the BoE to oppose the rate hike in November, Ramsden’s shift in outlook is seen as a significant development by markets.
However echoing comments made by his colleague Andy Haldane last week, Ramsden suggested that wage growth would likely be key in deciding rate hikes this year.
Ramsden went on to state:
‘There does seem to me more impetus on wages, we keep a close eye on what happens through the early part of this year.’
New Zealand Dollar (NZD) Subdued as Markets Eye US Data
Meanwhile the New Zealand Dollar remains muted at the start of this week’s session as investors await a slew of US data.
Markets are particularly focused on testimony from the incoming Federal Reserve Chair, Jerome Powell, in front of the House Financial Services Committee on Wednesday, as well as the latest US PCE index on Thursday.
With both of these likely to have an impact on Fed rate hike bets there is a chance that either may prompt some upward movement in the US Dollar, something which would likely weaken the appeal of NZD.
GBP/NZD Forecast: NZ Trade Figures to Weaken ‘Kiwi’?
Looking to the week ahead the GBP/NZD exchange rate may accelerate again overnight on Monday as New Zealand publishes its latest trade figures.
Economists forecast that after registering a surplus of NZ$0.64bn at the end of 2017, January figures will see trade tumble to a NZ$2.7bn deficit, likely weakening the New Zealand Dollar exchange rate.
Meanwhile the Pound may come under pressure in the second half of the week as a possible slide in the UK’s latest Manufacturing PMI likely weighs on Sterling sentiment.