Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Dips as UK Retail Sales Slide in December

Sterling (GBP) Slips against New Zealand Dollar (NZD) on back of Worse-than-Expected Retail Sales

This morning saw the release of some worse-than-expected British retail sales, reaching the lowest monthly decline since March.

Retail sales, excluding fuel fell by -1.3% in December – twice as far as expected over the course of the month –  from November’s revised figure of 1%.

The drop in retail sales is likely due to Black Friday, which pulled Christmas spending forward into November. This newer phenomenon has caused December sales to decrease over the past four years.

Following this release, the Pound New Zealand Dollar (GBP/NZD) exchange rate slipped by around 0.3% and is currently trading at an inter-bank rate of NZ$1.9135.

Pound (GBP) Climbs Further as Probability of No-Deal Decreases

The GBP/NZD exchange rate climbed steadily over the course of the session yesterday and sentiment for the Pound rose likely on the back of the assumption of a no-deal Brexit becoming increasingly slim.

Despite this assumption, Prime Minister Theresa May called opposition Labour leader Jeremy Corbyn’s push for no-deal to be ruled out as a possibility before talking as ‘an impossible condition’.

May undermined earlier statements from Chancellor Philip Hammond, who told business leaders that the option of no-deal would be ‘taken off the table’.

In an attempt to reassure, which likely kept the Pound buoyed, Hammond told them about a backbench bill that could force ministers to extend Article 50.

Strong New Zealand Business PMI does Little to Stop Sterling (GBP) Rise

December’s New Zealand Business PMI rose to 55.1, hitting the highest level since April 2018.

Despite the strong figure, NZD did not make significant gains on the Pound.

Thursday saw the Wall Street Journal report that US Treasury Secretary Steven Mnuchin had discussed lifting some or all US tariffs imposed on Chinese imports, suggesting an offer of a trade rollback during the discussions that have been scheduled for the end of January.

This is interpreted as a further sign of cooling tensions between the US and China, and a trade deal is likely within reach despite US Trade Representative, Robert Lighthizer opposing the idea.

Following this, the ‘Kiwi’ strengthened slightly against the Pound.

GBP/NZD Outlook: Will Signs of a US-China Cooling Bolster the New Zealand Dollar?

Theresa May is due to return to Parliament on Monday and present her new ‘Plan B’,  followed by a full debate and another vote due to occur on Tuesday.

Any GBP gains at the start of next week’s session may be limited by Parliament’s reaction to May’s new plan, and if the likelihood of a no-deal Brexit still remains low.

The New Zealand Dollar (NZD) may benefit in the coming week from any new developments or signs pointing towards continued improving relations between the US and China, with officials in Beijing cautiously optimistic about the two powers reaching a deal.

The beginning of next week will also include the release of the latest Chinese GDP figure, which is forecast to drop, and may further fears of a world economic slowdown that would likely see the risk-sensitive ‘Kiwi’ pushed down.

Hannah Wilson

Contact Hannah Wilson