Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Forecast to Await Upcoming Trade News

Update: Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Gains Limited as Investors Anticipate Trade Developments

While Monday morning saw the publication of some strong UK services results, the Pound to New Zealand Dollar (GBP/NZD) exchange rate’s gains were limited.

Brexit concerns weighed heavily on Sterling and left the currency unappealing, but GBP/NZD could extend its gains if concerns about New Zealand trade worsen.

The US President administration had shown no signs of backing away from the protectionist rhetoric and action it took last week.

If the US continues to take a stricter stance on imports, this could have a negative impact on the economic outlooks of trade-heavy nations like New Zealand.

Tuesday will see the first Global Dairy Trade (GDT) auction of March. As dairy is New Zealand’s biggest export, trade concerns could worsen if Tuesday’s dairy news disappoints.

Pound to New Zealand Dollar Exchange Rate also Bolstered by Impressive UK Services Stats

Brexit news dragged the Pound to New Zealand Dollar (GBP/NZD) exchange rate lower last week, but concerns about a potential trade war from the US, as well as stronger UK data, helped the pair to advance on Monday.

GBP/NZD opened last week at the interbank level of 1.91 and briefly touched on a low of 1.89 on Friday, before recovering and ending the week at 1.90. On Monday the pair continued its recovery.

The Pound’s (GBP) gains were bolstered by the publication of Britain’s February services PMI results, which surprised investors by coming in above expectations despite February’s other UK PMIs disappointing.

Markit’s services report was forecast to have edged higher from 53 to 53.3, but instead climbed to a stronger 54.5. As a result, the UK composite print also climbed to 54.5, beating the forecast 53.6.

This was Britain’s best services report in four months and was largely due to growth in new businesses. Consumers, on the other hand, remained cautious amid the possibility of interest rate hikes as well as the ongoing pay squeeze.

New Zealand Dollar (NZD) Exchange Rates Weakened by Fears of Trade War

Last week’s protectionist rhetoric from the US President Donald Trump worsened market fears that not only was a trade war possible – but that the US was actively seeking one.

The US announced plans to impose stricter tariffs on US imports of steel and aluminium. This weighed heavily on market appetite for risky trade-correlated currencies like the New Zealand Dollar (NZD).

Towards the end of last week, the US President stated that the US would ‘easily win’ a potential trade war and has since continued to indicate that his administration will be going ahead with the announced tariffs.

Concerns about how these changes could affect exporting nations like New Zealand, as well as the possibility that the US will continue to ramp up protectionist action, left NZD unappealing on Monday too.

Optimistic New Zealand trade stats published last week weren’t enough to keep the New Zealand Dollar appealing as investors became more concerned about the future trade outlook.

Brexit Concerns Limit Pound (GBP) Exchange Rate Strength

Brexit news has also hit the headlines again in the last week, limiting the Pound to New Zealand Dollar (GBP/NZD) exchange rate’s advances.

Markets are once again becoming anxious that a ‘hard Brexit’ could be possible if the UK and EU cannot come to a mutual agreement over major aspects of Brexit.

In particular, the issue of the Irish border and whether or not Northern Ireland will be able to maintain a soft border with both Ireland and the rest of Britain while still staying under UK law has once again caused deadlock in the talks.

EU chief negotiator Michel Barnier has also reminded the UK that a post-Brexit transition period is not a done deal. Overall, despite decent UK data, there is still much uncertainty in Pound trade.

Pound to New Zealand Dollar (GBP/NZD) Forecast: Political News in Focus

While the Pound to New Zealand Dollar (GBP/NZD) exchange rate was bolstered by UK ecostats on Monday, due to a lack of influential data the pair is more likely to be influenced by UK and US political news over the coming week.

Markets are anxious that deadlocks in UK-EU Brexit talks could lead to negotiations falling through, and a ‘hard Brexit’.

The New Zealand Dollar, on the other hand, is being pressured by concerns Donald Trump will continue to announce stricter protectionist measures on US imports.

With GBP/NZD trade focused on political developments, data due over the coming days may have only a limited effect on currency trade.

March’s first auction for dairy, New Zealand’s most lucrative commodity, will take place on Tuesday and NZ manufacturing stats will be published on Thursday. UK trade figures, as well as industrial and manufacturing production from January, will be published on Friday.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard