Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Steady despite Double Interest Rate Hike Forecast

Optimistic Predictions for BoE Interest Rate Hikes Leave GBP/NZD Exchange Rate Positive

The Pound (GBP) has continued to trade positively against the New Zealand Dollar (NZD) on 23rd April, amid speculation about two UK interest rate hikes in 2018.

Hawkish economists at the EY Item Club have suggested that there could be two Bank of England (BoE) rate hikes this year and two more in 2019.

Offering a mixed forecast on the assertion, EY Item Club’s Chief Economic Advisor Howard Archer has said;

‘[There could be] unnecessary pressures [on consumers]. [However], the burden of interest payments to the average household was at a record low at the end of 2017, and so consumers are in a relatively healthy position to cope with dearer money’.

Chance of Commons Approval for EU Customs Union Pushes GBP/NZD Exchange Rate Higher

The Pound (GBP) to New Zealand Dollar (NZD) exchange rate has risen by 0.3% today, in relation to two significant votes on the UK after Brexit.

The first vote took place last week, when a majority of peers in the House of Lords voted for the UK to stay in an EU customs union after Brexit.

While not legally binding, the vote will be followed up by another ballot in the House of Commons this week.

The upcoming vote is symbolic more than anything else, but the Pound’s appreciation suggests that majority backing for customs union membership is what markets desire.

The government line has been that the UK will not be part of any customs union after Brexit, but the potency of MPs backing such an arrangement may force the government’s hand.

New Zealand Dollar to Pound (NZD/GBP) Exchange Rate Drops as US Dollar Gains Ground

There has been little economic data out of New Zealand recently, which has left the New Zealand Dollar to Pound (NZD/GBP) exchange rate more vulnerable to external news.

The latest pressure on NZD has come from the US, where a strengthening US Dollar (USD) has reduced risk sentiment and lowered demand for the New Zealand Dollar (NZD).

This imbalance between the two currencies is partly down to predictions for interest rate hikes in 2018.

The US Federal Reserve is expected to raise interest rates two or three times this year, whereas the next Reserve Bank of New Zealand (RBNZ) rate hike may be a long way off.

GBP/NZD Exchange Rate Forecast: Is a Sterling Slump ahead on UK Borrowing Deficit?

This week, Pound to New Zealand Dollar (GBP/NZD) exchange rate movement may occur when UK government borrowing stats come out, along with later Q1 GDP estimates.

The first of these readings, tomorrow’s public sector net borrowing figure, is tipped to show a decline from the previous surplus of £0.27bn to a deficit of £-1.2bn.

Such a result could lower confidence among Pound traders and briefly worsen the GBP/NZD exchange rate.

Later in the week, the GDP growth rate estimates on Friday could also unsettle Pound (GBP) traders and cause Sterling losses.

The preliminary quarter-on-quarter figure is expected to show a slowdown from 0.4% to 0.3%, while no year-on-year change is expected.

If both readings were to show a surprise drop in growth levels then the Pound to New Zealand Dollar (NZD) exchange rate could show a late-week decline.

NZD/GBP Forecast: Will New Zealand Dollar to Pound Exchange Rate Turn Turbulent on Shrinking Trade Balance?

For New Zealand Dollar (NZD) traders, this week’s main data will be a consumer confidence measure and trade balance stats, both out on Thursday.

The ANZ Roy Morgan consumer confidence reading previously showed a 0.2% rise up to 128 points; if the index rises further then the New Zealand Dollar could appreciate.

The country’s later trade balance reading for March is forecast to show a reduction of the existing surplus with a shift from NZ$217m to NZ$200m.

Given that New Zealand’s trade balance would still be in the surplus range for such a result, the NZD/GBP exchange rate may not be significantly damaged by the results.

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