Pound to New Zealand Dollar Exchange Rate Rebounds But Gains Limited
Some investors have been buying the Brexit-battered Pound back from its cheapest levels this week, but strong New Zealand data combined with Brexit jitters have prevented the Pound to New Zealand Dollar (GBP/NZD) from recovering too far.
Last week saw GBP/NZD tumble two cents – from 1.9405 to 1.9205. This week so far, GBP/NZD has edged higher and trended in the region of 1.9262 at the time of writing.
Despite the Pound’s (GBP) broad weakness on ‘no deal’ Brexit fears this month, GBP/NZD has remained relatively range-bound due to weakness in the New Zealand Dollar (NZD) too.
Still, the market view on the New Zealand Dollar did become slightly more bullish this week thanks to some strong New Zealand retail sales data. The relatively risky currency was unable to capitalise and push GBP/NZD lower though, due to persistent risk-aversion in markets.
Pound (GBP) Exchange Rate Recovery Weighed by Persistent Brexit Jitters
Optimistic UK ecostats over the past week have not been enough to make forex markets overall more bullish on the Pound, as the British currency’s outlook remains dominated by Brexit-related uncertainties.
The possibility of a worst-case scenario ‘no deal’ Brexit, the likelihood that Brexit uncertainties will negatively impact consumer and business activity, and concerns that the process is causing fissures in the ruling UK Conservative Party have all undermined Sterling.
Tuesday saw the publication of Britain’s July public sector net borrowing report, which showed the biggest July borrowing surplus in 18 years.
Sterling was supported slightly by expectations that this could give the UK Treasury some wiggle room in the autumn Budget, but ultimately Sterling gains were limited due to those pervasive Brexit jitters.
According to a note from MUFG analysts:
‘That poor sentiment and substantial Brexit risk premium is unlikely to change and could even get worse over the short-term given the UK government is set to release 84 no-deal preparation notices,’
New Zealand Dollar (NZD) Exchange Rates Supported by NZ Retail Data
This week’s most notable New Zealand data was published during Wednesday’s Asian session, and all the Q2 retail sales prints came in well above expectations.
Not only was the previous quarter-on-quarter figure revised higher from 0.1% to 0.3%, the Q2 figure came in at a strong 1.1% rather than the predicted 0.4%.
The previous yearly figure was revised slightly lower from 3.0% to 2.8%, but the Q2 yearly stat printed at a solid 3.1%.
According to analysts, the data indicated that NZ growth was likely to be robust in Q2. Mark Smith from the ASB Bank argued that it meant the chances of a rate cut from the Reserve Bank of New Zealand (RBNZ) any time soon were low:
‘Strong retail volumes are consistent with our 0.9 percent…pick for Q2 GDP…the hurdle to a near-term OCR cut by the RBNZ remains high,’
Still, the New Zealand Dollar was unable to strengthen considerably from the news, as it was pressured by market aversion to riskier currencies.
The risky trade-correlated New Zealand Dollar’s appeal was limited as US President Donald Trump played down the chances of US-China trade relations improving too quickly.
Pound to New Zealand Dollar (GBP/NZD) Forecast: Politics and NZ Trade Data in Focus
The Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook will be focused more on potential political developments in the UK or US in the coming days.
Any developments in Brexit talks, or signs of optimism in US-China trade talks, would certainly have an impact on GBP/NZD. The Pound’s recovery attempts will likely remain limited unless ‘no deal’ Brexit fears fade somehow.
Meanwhile, the risky trade-correlated New Zealand Dollar would strengthen if US-China trade tensions lightened, as New Zealand has strong trade ties to both nations.
Aside from potential political developments, GBP/NZD investors will be anticipating New Zealand’s July trade balance report – due for publication during Friday’s Asian session.
July’s New Zealand trade stats will be the best indication so far of how New Zealand’s economy has been impacted by US protectionism and trade tariffs since the beginning of the third quarter.
Some UK distributive trades and finance mortgage approvals data will be published before the end of the week too, but these are unlikely to impact the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook.
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