Update: GBP/NZD Exchange Rate Flat as Unilever Relocation Sparks Brexit Fears
The Pound appreciated marginally against the New Zealand Dollar on the afternoon of 15th March, but has since lost momentum.
This flat GBP/NZD trading is down to still-high levels of uncertainty among Pound traders.
The latest event to lower confidence in the Pound has been the news that consumer goods titan Unilever will be moving its headquarters to the Netherlands.
Unilever executives have insisted that the move is not a response to Brexit, but this has failed to reassure GBP traders.
London Deputy Mayor for Business Rajesh Agrawal reacted to the news cautiously, saying;
“[This] brings into sharp focus the need for the government to secure a Brexit deal that secures London as Europe’s leading business centre. The best way to do this is for London and the UK to remain part of the single market and customs union”.
Pessimistic UK Economic Growth Outlook Drags Pound to New Zealand Dollar Exchange Rate Down
The Pound to New Zealand Dollar exchange rate (GBP/NZD) has fallen today on negative assessments made about the future performance of the UK economy.
While Tuesday’s Spring Statement offered a broadly optimistic outlook, some economic analysts have been taking a more detailed look at the figures.
On Wednesday, the Institute for Fiscal Studies (IFS) estimated that if the UK was to reach a balanced budget by 2025 then annual tax hikes of between £30bn and £40bn could be required.
IFS Director Paul Johnson added that this might only be the tip of the iceberg for future tax rises, warning:
‘That’s before additional demographic pressures which could add another £11bn a year to the money the government would need to find from somewhere in 2025 if it wants to cover the additional demands for health, pension and social care spending.’
Potential UK Exemption from Steel Tariffs Prevents Pound to New Zealand Dollar Exchange Rate Crash
Although the Pound has dropped against the New Zealand Dollar today, further losses have been prevented by a possible exemption for UK steelmakers from US metal tariffs.
UK International Trade Secretary Liam Fox has gone to Washington to try and secure an exemption and prevent the punitive tariffs being imposed on UK steel being sent to the US.
Before heading off, Fox said:
‘I will be making the case for the UK as part of the EU. Our current membership of the EU means that the European Commission will be coordinating the European response.’
Despite Fox’s confidence, US President Donald Trump has singled out the EU for targeting during his tariff announcements, which could limit the effectiveness of Fox’s argument.
New Zealand Dollar to Pound Exchange Rate Firms despite Slowing NZ GDP Growth
This appreciation may be down to the New Zealand Dollar recovering from hitting its lower limits following an earlier decline triggered by news of slowing GDP growth.
Although Q3 year-on-year GDP was revised up to 3%, the Q4 reading still showed a dip to 2.9%. Quarter-on-quarter levels remained at 0.6%, disappointing expectations for a rise to 0.7%.
Sounding positive after the data release, ASB Bank Chief Economist Nick Tuffley said:
‘Details in fourth-quarter GDP are encouraging and lift our confidence that economic growth will recover over the second half of this year.’
Pound to New Zealand Dollar Exchange Rate Forecast: Chance of GBP/NZD Rise on Inflation Slowdown
The Pound could recover against the New Zealand Dollar next Tuesday, when UK inflation data is released.
Estimates are for a year-on-year and month-on-month slowdown in February, with such a decline representing an improvement in conditions for UK consumers.
Weaker inflation would also move levels back towards the Bank of England’s (BoE) 2% target, potentially improving the chances of an interest rate hike in the coming months.
More immediately, the New Zealand Dollar could be influenced by February’s business PMI reading which is due out imminently.