GBP/NZD Exchange Rate Boosted by Surprise UK Wage Growth
UPDATE: The Pound New Zealand Dollar exchange rate is trading higher today, thanks to better-than-expected UK wage growth data.
The pace of wage growth without bonuses has risen from 2.9% to 3.1%, the fastest pace of wage growth since 2009.
Faster wage growth reduces the likelihood of a wage squeeze hitting UK households and makes a 2019 Bank of England interest rate hike more likely.
The UK unemployment rate has also remained at a historically-low 4%, which has further supported today’s GBP/NZD exchange rate rise.
Pessimistic Predictions for UK Economic Growth Causes GBP/NZD Exchange Rate Losses
The Pound (GBP) has fallen by -0.6% against the New Zealand Dollar (NZD) today, with losses being caused by a gloomy economic forecast linked to Brexit.
EY Item Club analysts have forecast that the UK will see GDP growth of 1.3% in 2018 and 1.5% in 2019; these are downgrades of former estimates for 1.4% and 1.6%, respectively.
EY’s Chief Economic Advisor Howard Archer has warned:
‘Heightened uncertainties in the run-up to and the aftermath of the UK’s exit [from the EU] could fuel business and consumer caution.
‘This is a significant factor leading us to trim our GDP forecasts for 2018 and 2019.’
Additional words of caution have come from EY Chief Economist Mark Gregory, who has said:
‘[UK businesses] should also consider a sharp downside to the economy in the event of a no-deal Brexit and make preparations for such a scenario.
‘Now is the time to start to think about the future shape of any UK business after 2020.’
New Zealand Dollar to Pound Exchange Rate Rises ahead of Inflation Rate Data
The New Zealand Dollar (NZD) has risen against Pound Sterling (GBP) today, thanks to NZD trader optimism about upcoming inflation rate data.
Figures for Q3 2018, out this evening, are tipped to show a faster pace of price growth for the year-on-year and quarter-on-quarter readings.
Such results could trigger greater NZD/GBP exchange rate gains, as this would open the door to an interest rate hike from the Reserve Bank of New Zealand (RBNZ).
Higher inflation puts more pressure on central bank policymakers to raise interest rates, not least because continued inflation growth risks causing a wage squeeze.
GBP/NZD Forecast: Risk of Pound Sterling Losses on UK Jobs Market Data
This week, Pound/New Zealand Dollar exchange rate movement may be caused by Tuesday’s UK jobs market data, Wednesday’s UK inflation rate stats and EU summit and Thursday’s UK retail sales figures.
The jobs market figures could extend existing GBP/NZD exchange rate losses, as they are tipped to show a slower pace of wage growth and a rise in jobless claims.
Additional losses could be caused if UK inflation rates are reported lower, as this would lessen the likelihood of a 2019 Bank of England (BoE) interest rate hike.
The tide could turn in the Pound’s favour later on Wednesday, however, if the day’s EU summit on Brexit brings signs of a breakthrough in negotiations.
This week’s last major data may also support a GBP/NZD exchange rate recovery, if Thursday’s retail sales stats show rising activity during September.
For NZD traders, this week’s main data is Tuesday’s Global Dairy Trade price index reading.
Measuring changes to global dairy prices, this reading is tipped to show a -1.7% drop which could unsettle NZD traders and cause NZD/GBP exchange rate losses.