GBP Update: Pound Sterling to New Zealand Dollar Exchange Rate Falls as Traders Look to Fed and ECB
UPDATE 15:10 BST: The Pound (GBP) has fallen further against the New Zealand Dollar (NZD) on Tuesday afternoon, dropping by -0.3% in the pairing.
This worsening of the GBP/NZD exchange rate is mainly down to currency traders turning their attention elsewhere.
There will be two major central bank meetings over Wednesday and Thursday, both of which have put traders on edge.
Wednesday evening’s Federal Reserve meeting could boost the US Dollar, if policymakers raise interest rates to 2%.
Thursday afternoon’s European Central Bank (ECB) meeting could have a similar effect on the Euro, should officials support a wind-down of quantitative easing.
Both of these upcoming events have pushed Pound Sterling to the sidelines, although GBP could recover on Wednesday morning’s UK inflation rate figures.
Surprise Slowdown in Pace of UK Wage Growth Drags GBP/NZD Exchange Rate Down
UPDATE 10:31 BST: The Pound (GBP) recovered against the New Zealand Dollar (NZD) earlier today, but has since dropped back due to disappointing data.
The pace of UK wage growth in April has slowed, unsettling Pound Sterling traders and causing today’s GBP/NZD exchange rate drop.
The readings were forecast to show steady levels of wage growth, so these slowdowns have been an unwelcome surprise.
Other UK news has been similarly disappointing – although there were more people in employment, the unemployment rate has remained static at 4.2%.
Cautious Outlook on UK Economic Growth Leaves GBP/NZD Exchange Rate Down
The Pound (GBP) has continued to trade poorly against the New Zealand Dollar (NZD) today, slipping by almost -0.4% in the pairing.
This follows the release of the National Institute of Economic and Social Research (NIESR) GDP estimate for May, which has come in at 0.2%.
This is better than the previous estimate of 0.1%, but below the anticipated 0.3% printing.
National Institute of Economic and Social Research (NIESR) Head of UK Macroeconomic Forecasting Amit Kara commented on the estimate, saying:
‘We estimate that output expanded by just 0.2% in the three months to May 2018, which is around half the potential growth rate of the economy.’
Mr Kara was not entirely pessimistic, however, adding that:
‘Looking ahead, we expect the economy to strengthen from here mainly because monetary policy in the UK and elsewhere continues to remain accommodative.’
This forecast came with a number of caveats, however, so hasn’t been enough to prevent further GBP/NZD exchange rate losses.
Falling UK Production Levels Cause GBP/NZD Exchange Rate Losses
The Pound (GBP) has lost ground to the New Zealand Dollar (NZD) today, falling by around -0.2% in the pairing.
This deterioration has been caused by a strong negative reaction to the latest UK production figures for April.
Levels of construction, industrial and manufacturing production have slowed across the board, while construction orders in Q1 2018 have also fallen sharply.
Summing up the poor showing, National Institute for Economic and Social Research (NIESR) Head of UK Macroeconomic Forecasting Amit Kara said:
‘Economic growth has slowed materially since the start of this year and it continues to remain weak.
‘The latest data also shows a notable slowdown in manufacturing sector output that appears to be driven by both domestic and external conditions.’
New Zealand Dollar to Pound (NZD/GBP) Exchange Rate Rises as Manufacturing Sales Surge
The New Zealand Dollar to Pound (NZD/GBP) exchange rate has risen today, thanks to highly supportive manufacturing data out over the weekend.
Levels of manufacturing sales in Q1 2018 rose by 3.1% for the year-on-year reading, beating the expected 2.9% printing.
Responding positively to the news, Stats NZ Manufacturing Statistics Manager Sue Chapman said:
‘The rise in transport equipment and machinery manufacturing follows a fall in the previous December quarter.
‘The latest rise is the largest since March 2011, and the fourth-largest rise since the series began.’
In other news, NZD traders have remained cautious ahead of Tuesday’s meeting between US President Donald Trump and North Korean leader Kim Jong-un.
It is hoped that the historic summit could bring a lasting peace to the Korean peninsula, which could have a knock-on positive impact on New Zealand’s economy in the long-term.
GBP/NZD Forecast: Can Pound Sterling Recover on UK Wage Data?
This week, GBP/NZD exchange rate movement may be caused by UK jobs data on Tuesday, followed by inflation stats on Wednesday and Thursday’s sales figures.
If the pace of wage growth accelerates and the unemployment rate unexpectedly drops, the Pound (GBP) could firm against the New Zealand Dollar (NZD).
Such results would increase the likelihood of a near-term Bank of England (BoE) interest rate hike, or at least one before the end of 2018.
Wednesday’s inflation figures could prove similarly supportive if they show an as-expected rise in price growth during May.
Higher inflation might keep the rate of price growth below the pace of wage growth, but still put pressure on the BoE to consider higher interest rates.
The week’s closing UK news might have a more mixed effect on the Pound (GBP). Year-on-year retail sales levels are tipped to rise, but slower monthly growth is expected.
Annual readings are typically more high-impact than monthly results, so Pound Sterling could still appreciate on the news.
This week’s only significant economic data from New Zealand will be a business PMI reading late on Thursday, which is predicted to show a decline.
Reduced business activity could lower confidence among NZD traders, although given the abundant UK data, the Pound will likely have lasting influence in weekly pairing movement.