Despite the Pound seeing another rebound attempt on Monday in response to some stronger than expected UK mortgage data, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate was unable to sustain much in the way of gains due to broad strength persisting in the New Zealand Dollar. The New Zealand Dollar is a risk and trade-correlated currency that has been benefitting from global trade and growth hopes, as well as US Dollar weakness.
The New Zealand’s resilient strength in recent weeks has kept it near its best levels and kept GBP/NZD near its lows. Last week saw GBP/NZD tumble from the level of 1.9682 to close the week nearer the level of 1.9525.
While GBP/NZD has recovered from last week’s two month worst level of 1.9427, the pair is trending just around a cent above that level at the time of writing on Monday.
GBP Exchange Rates Supported by Surprisingly Strong UK Mortgage Results
Investors have been hesitant to buy the Pound in recent weeks, since UK Prime Minister Boris Johnson indicated that he would rather aim for a hard Brexit than have to further extend the Brexit transition period.
His stance caused fears of a worst-case scenario cliff-edge Brexit to return, and the Pound slumped.
Last week saw Sterling remain unappealing due to these concerns, and a lack of fresh support meant that as investors bought the British currency back from its worst levels the recovery was limited.
The Pound finally found a bit more solid support today, in the form of Britain’s latest mortgage approvals results.
A surprise jump in mortgage approvals boosted demand for the Pound, as it indicated that UK economic activity was not that badly impacted by UK election and political uncertainty towards the end of the week.
‘November’s jump in mortgage approvals was all the more surprising as the expectation had been that housing market activity would be hampered by heightened political uncertainties. This was certainly indicated by November surveys, notably from the RICS’
While another year of Brexit uncertainty is expected, general hopes that there will be less political uncertainty overall in 2020 is also keeping the Pound supported.
NZD Exchange Rates Bolstered by Trade Sentiment and Broad Rival Weakness
The New Zealand Dollar has been among the market’s most appealing major currencies in recent weeks, as strong New Zealand data combined with signs that the global trade and growth outlooks are improving have doused Reserve Bank of New Zealand Dollar (RBNZ) interest rate cut speculation.
Data published in the middle of December indicated that New Zealand’s Q3 growth rate had been better than expected. It softened RBNZ interest rate cut speculation and global factors have only further bolstered this sentiment.
The US and China have agreed to a ‘phase one’ trade deal and are expected to sign the deal into law with a ceremony soon. With the trade outlook improving, risk and trade-sentiment surged, weakening the safe haven US Dollar and boosting the ‘Kiwi’.
With the US Dollar weak, the New Zealand Dollar was only even more appealing. According to Analysts from Action Economics:
‘The Dollar has declined against a backdrop of coursing risk-on sentiment in global equity markets with investors anticipating the US-China phase 1 trade deal to be signed off soon, which will come amid a world of expansive monetary policy and benign inflation,’
GBP/NZD Exchange Rate Forecast: Global Trade and Growth Outlooks Remain in Focus
While the Pound is rebounding from its lows, Brexit uncertainty continues to weigh heavily on the currency’s outlook, and there may not be much in the way of Brexit developments in the coming sessions.
Instead, movement will remain fairly quiet and volatile for the rest of the year, and notable ecostats will begin to come in when markets return from New Year bank holidays on Thursday.
Thursday will see the publication of Britain’s final December manufacturing PMI results, followed on Friday by construction PMI data.
If these stats beat expectations, the Pound could see stronger demand as fears of Brexit uncertainty harming the economy would soften.
As for the New Zealand Dollar, a lack of upcoming New Zealand data means the currency is likely to be driven by upcoming US-China trade developments and US data.
US manufacturing data and Federal Reserve meeting minutes news could cause some late-week Pound to New Zealand Dollar exchange rate on Friday.
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TAGS: Pound New Zealand Dollar Forecasts