News that UK consumer spending had fallen to its lowest levels since May was not enough to keep the Pound to New Zealand Dollar exchange rate from recovering ground.
Last Week: Lower NZ Unemployment Rate Boosts New Zealand Dollar
A surprise improvement in the fourth quarter New Zealand unemployment rate saw the appeal of the New Zealand Dollar improve sharply last week.
As the rate clocked in at 4.9% instead of the forecast 5.6% this encouraged hopes that the New Zealand economy has continued to largely shrug off the impact of the Covid-19 crisis.
However, the GBP/NZD exchange rate returned to a stronger footing ahead of the weekend in response to the latest Bank of England (BoE) policy announcement.
With policymakers talking down the prospect of negative interest rates investors found fresh reason to pile into the Pound, although the extent of these gains ultimately proved limited.
Three Things to Watch out for This Week
1. New Zealand retail card spending
Support for the New Zealand Dollar could pick up once again if January’s retail card spending figures point towards heightened consumer confidence.
As long as New Zealand consumers show signs of shaking off the wider global anxiety over the ongoing pandemic this may offer NZD exchange rates a solid boost.
2. New Zealand food inflation
With forecasts pointing towards a steady uptick in January’s food inflation reading the New Zealand Dollar may find further cause for confidence.
Evidence that inflationary pressure continued to build at the start of 2021 could encourage a more optimistic outlook for the Reserve Bank of New Zealand (RBNZ), limiting bets of potential monetary loosening to come.
3. UK gross domestic product
Worries over the health of the UK economy may pick up once again in the wake of the fourth quarter gross domestic product report.
While forecasts suggest that the quarterly growth rate remained in positive territory any downside surprise here could weigh heavily on demand for the Pound.
GBP/NZD Outlook
Fresh signs of resilience within the New Zealand economy could encourage the Pound to New Zealand Dollar exchange rate to shed further ground this week.