Growing Predictions for Upcoming UK Interest Rate Hike Trigger GBP/NZD Rally
The Pound has extended its earlier gains against the New Zealand Dollar today, rising by 0.7% in the GBP/NZD pairing.
This favourable trading comes as Pound traders prepare for what could be a golden week of UK economic data.
The ideal outcome would be better-than-expected ecostats across the board, which raise the chances of a Bank of England (BoE) interest rate hike.
Summarising the situation, ADM Investor Services International Global Strategist Marc Ostwald said;
‘With markets almost fully discounting a BOE rate hike, this week’s run of monthly indicators are anticipated to give the [BoE] hike a green light’.
Chance of UK GBP/NZD Exchange Rate Rally if UK Wage Squeeze Eliminated This Week
The Pound to New Zealand Dollar exchange rate rose by 0.3% today, ahead of what may be a favourable week for Sterling investors.
At present, the week’s only UK economic news has been that shopper footfall dropped by -6% in March, the largest yearly decline since late 2010.
Fewer people entering shops could harm high street outlets, but there may still be increased shopping activity online.
New Zealand Dollar to Pound Exchange Rate Slides on Gloomy Economic Outlook
The New Zealand Dollar has fallen by -0.3% against the Pound today, in addition to trading poorly against other currency peers.
This performance follows a negative assessment of the economy from veteran NZ economist Roger J Kerr.
Mr Kerr has warned that internal and external developments could harm economic growth, stating:
‘Foreign investment is deterred from coming into New Zealand due to sudden rules changes … in the oil and gas exploration sector. Global trade wars [are] bad news for the NZ economy for all sorts of reasons.’
‘Export commodity prices…are unlikely to get any better and the greater probability…is that they turn down from here.’
GBP/NZD Forecast: UK Jobs and Inflation Data Could Boost Pound
This week, positive Pound/New Zealand Dollar exchange rate movement may occur when UK jobs data is released tomorrow.
Additional Pound movement may be triggered by the release of inflation rate stats on Wednesday, followed by retail sales figures a day later.
Taking these in order, Tuesday’s UK data will be a measure of jobless claim counts in March, along with February’s unemployment rate and wage growth readings.
The number of people claiming benefits is tipped to rise, along with the pace of earnings growth.
The Pound could advance against the New Zealand Dollar on such news, especially if unemployment levels remain at their current historic low of 4.3%.
Wednesday’s inflation rate figures could also prompt a Pound to New Zealand Dollar exchange rate rise if they show a price growth slowdown during March.
Slowing inflation and rising wage growth could cause a Pound rally if the pace of earnings overtakes inflation on the assumption that consumers will have more money in their pockets to spend.
Thursday’s data may not support the Pound – annual retail sales activity is forecast to have risen compared to March 2017, but monthly readings are expected to show slowing activity.
New Zealand Data to Include Dairy Price Auction and Inflation Figures
New Zealand’s weekly economic data won’t be as abundant, consisting of a global dairy price measure on tomorrow followed by inflation rate stats on Wednesday.
Tuesday’s Global Dairy Trade price index previously showed a -0.6% decline in global dairy prices; another decline might prompt further NZD losses.
As a major global exporter of dairy products, New Zealand’s economic performance can be damaged if dairy prices drop.
Q1 NZ inflation rate figures, out on Wednesday, are currently tipped to show slowing price growth compared to Q1 2017, but a quarter-on-quarter rise compared to Q4 2017.
Year-on-year results are usually considered more important, so the New Zealand Dollar could decline if a slowdown is reported.
Slowing inflation will lower the odds of a Reserve Bank of New Zealand (RBNZ) interest rate hike, as it will put levels at the lower end of the RBNZ’s 1-3% inflation target range.