GBP/NZD News: Pound Sterling to New Zealand Dollar Exchange Rate Rises 0.3% on RBNZ Caution

June 28, 2018 – Written by James Fuller

Yesterday saw the Pound to New Zealand Dollar exchange rate open in the region of 1.9311 at the start of daily trading.

Despite an early rise to a rate of 1.9408, the GBP/NZD pairing ultimately closed down lower around 1.9319 by the evening.

The main factor lowering demand for the Pound yesterday was the concern that not enough progress had been made in Brexit negotiations.

These fears came ahead of today’s EU summit, which has aptly proven that yesterday’s worries were entirely justified.

The Pound did make a brief advance against the New Zealand Dollar yesterday, though; this was down to a worse-than-expected ANZ business confidence reading for June.

The measurement showed that confidence levels had fallen from -27.2 points in May to -39 in June, a much worse result than the forecast -27.8 point result.

Business confidence in New Zealand has tumbled since a change of government in late-2017 – this result showed that companies are still extremely wary of the new administration’s policies.

Daily GBP/NZD News: Pound Sterling to New Zealand Dollar Exchange Rate Rises despite Brexit Concerns

The Pound’s (GBP) rise against the New Zealand Dollar (NZD) today is mainly down to the NZD being a weaker currency; UK news has proven disappointing for the most part.

Today has seen the first of two EU summit sessions held, during which EU leaders have criticised the apparent lack of Brexit progress in 2018 so far.

Among the critics has been Irish Prime Minister Leo Varadkar, who said:

‘We expected there would be progress at this summit in June, like there was in March and December.

‘There hasn’t been. So I will be saying to Prime Minister May we all need to intensify our efforts now.

‘All of us want there to be a deal. We need a deal. Europe needs a deal, Britain needs a deal too.’

Pessimism about the current state of Brexit was strengthened when Mr Varadkar later added:

‘Any relationship that exists in the future between the EU and the UK isn’t going to be one of absolute equals.

‘We are 27 member states; the UK is one country. We’re 500m people; the UK is 60m. So that basis fact needs to be realised and understood.’

As mentioned above, while this news has caused widespread GBP exchange rate losses, the New Zealand Dollar has been the weaker currency today so a GBP/NZD advance has occurred.

Reserve Bank of New Zealand (RBNZ) Meeting Disappoints, Causing NZD/GBP Exchange Rate Decline

The Pound’s (GBP) saving grace in trading against the New Zealand Dollar (NZD) today has been the latest Reserve Bank of New Zealand (RBNZ) interest rate meeting, which led to NZD losses.

RBNZ policymakers left interest rates unchanged at 1.75% as expected, but disappointed traders by signalling that rates could remain static for the foreseeable future.

Continued loose monetary policy from the RBNZ was also advocated, with the bank’s statement reading:

‘Employment is around its sustainable level and consumer price inflation remains below the 2% mid-point of our target, necessitating continued supportive monetary policy for some time to come.’

Perhaps the most damaging after-effect of the RBNZ meeting has been the forecast from JP Morgan economist Ben Jarman that there could be a rate cut from the central bank instead of a hike:

‘Today’s commentary consolidates the sense that, unlike the RBA, the RBNZ will keep acknowledging that rate cuts are a plausible scenario.

‘We are forecasting the RBNZ to stay on hold through the end of 2019, with risks biased toward cuts.’

GBP/NZD Exchange Rate Forecast: Will Pound Sterling Decline on Poor UK GDP Stats?

Today’s Pound to New Zealand Dollar (GBP/NZD) exchange rate gains may not last until the weekend, as a number of pessimistically-predicted UK data releases are out on Friday morning.

These will include a GfK consumer confidence reading for June, along with finalised GDP and business investment figures for Q1 2018.

The confidence measure is expected to show a negative reprint, while the final GDP and investment stats are both tipped to confirm a slowdown at the start of the year.

These results, along with any Brexit criticisms from the second day of the EU summit, might panic GBP traders and cause a GBP/NZD exchange rate decline on Friday.

The week’s last economic data from New Zealand will come out late on Friday night, consisting of a measurement of building permits in May.

The figure previously showed a -3.7% decline in April, so another negative reading might mean that any GBP/NZD exchange rate losses are lessened.

Fewer building permits being granted would imply tougher times for the NZ construction sector, along with a potential reduction in homes being built.

There are forecasts that Auckland could suffer from a shortfall of available homes in the future, so the permits data may be considered in this context and cause an NZD decline.

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TAGS: Pound New Zealand Dollar Forecasts