Fears over Post-Brexit Trade Costs Bring Additional GBP/NZD Exchange Rate Losses
UPDATE 15:35 BST: Today has been a poor start to weekly GBP/NZD trading, with Pound Sterling falling by 0.3% against the New Zealand Dollar.
The Pound has been damaged by negative forecasts from the British Chambers of Commerce (BCC), in addition to a report on Brexit.
This latter factor is an as-yet unreleased report from consultancy company Oliver Wyman, which warns about the effects of Brexit on UK households.
The report estimates that UK households could lose up to £1,000 a year because of potential trading issues.
A weak Pound and higher trading tariffs would increase the costs of imports into the UK; it is suspected that these extra costs would be passed onto consumers.
The theory of the report has been challenged by some, but remains another factor dragging the GBP/NZD exchange rate down today.
Fears of Stagnating UK Economy Cause Continued GBP/NZD Exchange Rate Losses
UPDATE 13:05 BST: The Pound (GBP) has fallen further against the New Zealand Dollar (NZD) today, as traders digest recent economic forecasts.
Analysts at the British Chambers of Commerce (BCC) have predicted that slower growth could damage investment in the UK, further weakening Sterling.
BCC Director General Adam Marshall has warned that at an uncertain time for the UK:
“A lot of small businesses are continuing to invest, but a lot of medium-sized and larger businesses have paused investment.”
GBP/NZD Exchange Rate Drops on Downgraded UK GDP Forecast
The Pound (GBP) got off to a bad start against the New Zealand Dollar (NZD) today, having fallen soon after the open of trading.
There hasn’t been any hard UK economic data, so instead the Pound has been weakened by an economic forecast downgrade from the British Chambers of Commerce (BCC).
BCC analysts have cut their UK growth estimates for 2018 and 2019, from 1.3% to 1.4% and from 1.5% to 1.4% respectively.
Compounding this negative outlook, BCC Head of Economics Suren Thiru said:
“The risks to the [UK economic] outlook are on the downside. A messy departure from the EU would likely slow UK GDP growth further over the medium term.”
New Zealand Dollar to Pound (NZD/GBP) Exchange Rate Rises on Services Sector Growth
The New Zealand Dollar (NZD) has risen by 0.3% against Pound Sterling (GBP) today, thanks to Sunday’s positive services sector data.
The performance of services index (PSI) rose from 56.4 points to 57.3 during May, which was the second-highest rate of growth in the past 11 months.
There was also supportive news concerning orders on services, with BusinessNZ Senior Economist Doug Steel saying:
“New orders surged higher to a very strong 64.6 [points], a reading only bettered twice in the past 10 years. It signals good demand for services and bodes well for sales ahead.”
GBP/NZD Forecast: Are Pound Sterling to New Zealand Dollar Exchange Rate Gains ahead on BoE Meeting?
This week, Pound/New Zealand Dollar exchange rate movement may be caused by Confederation of British Industry (CBI) data on Wednesday and Thursday’s Bank of England (BoE) meeting.
In the former case, the CBI’s industrial orders figures might cause a GBP/NZD exchange rate recovery, if they show a forecast-matching rise from -3 points to 2.
While this would only be a small positive reading, it would be a step towards the 17-point highs seen in 2017.
The more significant BoE event could cause major Pound Sterling gains or losses, depending on the opinions of BoE officials.
Policymakers will be meeting to discuss any adjustment to interest rates, but no change is expected from the current 0.5%.
More important will be Governor Mark Carney’s speech at a press conference after the rate decision.
If Mr Carney believes that a 2018 interest rate hike is still possible, the Pound could appreciate on such optimism.
Economic analysts have recently had their confidence knocked by poor UK economic data, but some are still holding out for a rate hike as soon as August.
New Zealand Dollar Forecast: Risk of NZD/GBP Exchange Rate Turbulence on GDP Slowdown
This week’s main economic data from New Zealand will be Tuesday’s dairy price reading and consumer confidence measure, followed by Wednesday’s GDP stats.
Tuesday could bring further NZD/GBP exchange rate gains, should global dairy prices rise and the Q2 consumer confidence score increase as expected.
On the other hand, if the Q1 GDP growth rate figures on Wednesday show slowing growth, the New Zealand Dollar (NZD) could fall back against Pound Sterling (GBP).
Although the NZ economy has impressed in previous years, there are worries that the country is entering a period of slower economic growth.