Evidence of Weakening UK Retail Sector Weighs on GBP/NZD Exchange Rate

Fresh evidence of weakness within the UK retail sector put a dampener on the GBP/NZD exchange rate, with the economy looking at risk of faltering once again in the face of Covid-19 pressures.

Last Week: Mixed UK and NZ Inflation Data Prompt GBP/NZD Volatility

Although the UK consumer price index report showed a modest uptick in inflation in September last week this failed to shore up the GBP/NZD exchange rate for long.

As the headline inflation rate remains some way shore of the Bank of England’s (BoE) 2% target this positive showing is unlikely to alter the outlook of dovish policymakers.

While the third quarter New Zealand inflation rate fell short of forecasts this was not enough to drag the New Zealand Dollar lower ahead of the weekend.

Positive signs of progress towards a potential Covid-19 vaccine and an improved sense of market risk appetite helped to lift NZD exchange rates.

Three Things to Watch out for This Week

1. ANZ Business Confidence Index

The mood towards the New Zealand Dollar could see further improvement on the back of October’s ANZ business confidence index.

While the index looks set to remain in a negative state any solid uptick on the month may still encourage NZD exchange rates to trend higher.

2. UK Mortgage Approvals

Confidence in the underlying health of the UK economy may deteriorate, meanwhile, if mortgage approvals fall on the month as forecast.

Signs of a weaker willingness to both lend and borrow at the end of the third quarter could weigh heavily on the economic outlook, suggesting a greater level of anxiety within the economy.

3. ANZ Roy Morgan Consumer Confidence Index

Any positive gains for October’s ANZ consumer confidence index may give NZD exchange rates a solid boost on Thursday evening.

As the New Zealand economy appears to have largely shrugged off the impact of the Covid-19 crisis the New Zealand Dollar looks set to benefit from any fresh signals of domestic optimism.

GBP/NZD Outlook

Signs of growing New Zealand confidence are forecast to keep GBP/NZD exchange rate on the back foot in the days ahead.

Louisa Heath

Contact Louisa Heath