November 23, 2020 – Written by Frank Davies
Strong NZ Retail Sales Fail to Dent Pound New Zealand Dollar Exchange Rate
The Pound to New Zealand Dollar (GBP/NZD) exchange rate rallied at the start of the week in spite of an unexpectedly strong rebound in the third quarter New Zealand retail sales data.
Although sales rose 28% on the quarter this was not enough to give the New Zealand Dollar any boost against its rival, even as the general sense of market risk appetite improved.
Instead, the Pound pushed higher across the board as November’s UK manufacturing PMI saw a surprise improvement on the month.
This managed to overshadow the disappointing nature of the corresponding services PMI, even though the service sector accounts for more than two thirds of the UK gross domestic product.
Deteriorating CBI Distributive Trades Index to Weigh on GBP/NZD Exchange Rate
The Pound could lose its positive momentum on Tuesday, though, as forecasts point towards a fresh decline in the CBI distributive trades index.
Evidence of increasing anxiety within the retail sector would leave GBP exchange rates exposed to an even greater degree of selling pressure.
As stronger levels of consumer spending have previously helped to shore up the UK economy in periods of economic turmoil a weak reading here would put pressure on the Pound.
As long as markets see reason to bet that the UK could experience a double-dip recession before the end of the year the appeal of the Pound looks set to deteriorate sharply.
With the issue of Brexit still unresolved the upside potential for the GBP/NZD exchange rate looks extremely limited in the near term.
Strengthening NZ Trade Conditions Forecast to Support New Zealand Dollar
Support for the New Zealand Dollar may recover on Wednesday, meanwhile, if October’s set of New Zealand trade data can sufficiently impress investors.
While the retail sales data failed to make an impression, NZD exchange rates could find a strong rallying point on the back of any narrowing of the trade deficit.
A stronger level of export volumes may encourage greater confidence in the outlook of the New Zealand economy, indicating a more limited impact from ongoing global Covid-19 disruption.
On the other hand, if exports fail to pick up on the month as anticipated this may leave the New Zealand Dollar vulnerable to a fresh bout of selling pressure.
As the impact of the latest Covid-19 vaccine news fades over the course of the week a deteriorating sense of market risk appetite may also dent NZD exchange rates.
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TAGS: Pound New Zealand Dollar Forecasts