Pound New Zealand Dollar (GBP/NZD) Exchange Rate Falls as NZ Retail Sales Hit Nine-Month High

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Slides on Strong Kiwi Retail Sales

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate edged lower, leaving the pairing trading at around NZ$2.0047.

New Zealand retail sales rallied to the strongest level in nine months, buoying the ‘Kiwi’.

During the third quarter, sales rose by 1.6%, with the strongest growth in purchases of electronic and electrical appliances.

Commenting on the data, Stats NZ retail statistics manager, Sue Chapman said:

‘Higher electronic sales volumes in the quarter coincided with some retailers promoting sales of big screen televisions before the Rugby World Cup in Japan, which started near the end of September.

‘Products like TVs, computers, and mobile phones are getting cheaper, and New Zealanders are buying more of them.’

The Reserve Bank of New Zealand’s (RBNZ) interest rate cuts, stronger wage growth and housing market has given consumers extra confidence.

Commenting on this, senior economist at Westpac, Satish Ranchhod noted:

‘We’re really seeing household spending appetites come back to life […] we think that’s going to continue through the December quarter and into 2020.’

US and China Agree to Maintain Communication

On Tuesday morning, reports revealed that top negotiators from both China and the US held a phone call as they attempt to hammer out a trade deal.

US Trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to Chinese Vice Premier Liu He, with the three discussing issues related to a ‘phase one’ trade deal.

The Chinese Commerce Ministry also revealed that both sides also agreed to maintain communication on the remaining issues.

The ministry also added that they discussed ‘core issues of concern’ and reached ‘a common understanding on resolving relevant problems.’

However, markets have ignored the news and it had little effect on risk appetite amongst investors.

Added to this, the call comes amidst heightened tensions as China summoned US Ambassador, Terry Branstad to protest against the Hong Kong Human Rights and Democracy Act being passed through US Congress.

Sterling (GBP) Slumps as Labour Gain Support

The Pound remained under pressure against the New Zealand Dollar despite polls showing the Conservative Party continued to remain in the lead in opinion polls.

Markets expect the Tories to secure a majority in the 12th December election, although support for the party fell one point to 41%.

Meanwhile, support for the Labour Party was up to 34% according to an opinion poll from ICM for Reuters.

Commenting on this, global head of G10 FX strategy at Bank of America Merrill Lynch (BAML), Athanasios Vamvakidis noted:

‘Today when I was talking to clients they were asking why Sterling is not stronger given the polls.

‘Most of the investors have missed the rally in Sterling […] They were not positioned for this.’

Pound New Zealand Dollar Outlook: Will a Dovish RBNZ Weigh on NZD?

Looking ahead to this evening, the New Zealand Dollar (NZD) could slide against the Pound (GBP) following the release of the Reserve Bank of New Zealand’s (RBNZ) Financial Stability Report.

If the report is overly dovish and focuses on the global economic risks, it could leave the ‘Kiwi’ under pressure.

Meanwhile, Sterling is likely to edge up against the New Zealand Dollar if further polls suggest that the Conservatives are in the lead.

If polls reveal that the Tories continue to remain ahead of the Labour party, the Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate will rise.

Millie Empson

Contact Millie Empson