Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Slips as NZ Exports Defy Trade Anxiety

Higher NZ Exports Knock Back Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate

As May’s New Zealand trade data bettered forecasts this left the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate on a weaker footing, even in the face of mounting global anxiety.

Although tensions between the US and Iran showed no signs of easing, instead escalating further overnight, the impact on the risk-sensitive New Zealand Dollar (NZD) proved limited.

Investors instead focused on an unexpectedly strong improvement in export volumes on the month, which suggests that the New Zealand economy is escaping the impact of the ongoing slowdown in global trade.

While this was not enough to prevent the headline trade surplus narrowing from 443 million to 264 million NZD exchange rates still gained ground, with markets having anticipated an even weaker reading.

Political Jitters Limit Pound Sterling (GBP) Exchange Rate Support

Demand for Pound Sterling (GBP) picked up a little, meanwhile, as domestic political anxiety saw a temporary lull.

However, as Conservative MPs continue to push leadership contender Boris Johnson for greater clarity over his Brexit plans the potential for a fresh decline remains.

As investors anticipate a solid uptick in this morning’s CBI distributive trades index this helped to limit the downside potential of the GBP/NZD exchange rate in the near term.

If the index fails to make a significant move back towards positive territory, recovering from the sharp decline of -27 seen in May, this could see the Pound fall out of favour once again, though.

RBNZ Dovishness Forecast to Drag on New Zealand Dollar (NZD)

The mood towards the New Zealand Dollar could sour overnight, however, as the Reserve Bank of New Zealand (RBNZ) delivers its latest policy decision.

Even though the central bank is widely expected to leave interest rates on hold at this juncture the nature of the accompanying commentary could dent NZD exchange rates.

As long as the RBNZ remains on course to cut interest rates to a fresh record low before the end of the year the antipodean currency is likely to soften.

If policymakers deliver a surprise interest rate cut this may also give the GBP/NZD exchange rate a strong rallying point tonight.

Pound Sterling (GBP) Set for Losses on Weaker Mortgage Approvals

While developments in the Conservative leadership contest are likely to dominate the outlook of GBP exchange rates this week weakness may also be in store on the back of the latest mortgage approvals data.

Forecasts point towards the BBA loans for house purchase headline figure dropping from 42989 to 41000 in May, suggesting a weaker level of domestic confidence.

Evidence that lenders and households are taking a more cautious view in the face of ongoing Brexit-based uncertainty would leave investors with little incentive to favour the Pound over its rivals.

As long as comments from Bank of England (BoE) policymakers continue to lean towards dovishness this should keep the GBP/NZD exchange rate on a weaker footing.

Louisa Heath

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