The Pound has traded at 1.8761 against the New Zealand Dollar on Tuesday, although UK inflation has been less-than-supportive for Sterling.
In brief, annual UK inflation hit 2.7% in April, which raised fresh fears of a wage squeeze negatively impacting the UK economy.
Looking to the future, the Pound could be shifted after all of the main UK parties have unveiled their manifestos.
Labour has recently unveiled its manifesto pledges, as has the Welsh party Plaid Cymru. In terms of the main players, this leaves the Conservatives, the Liberal Democrats, the Scottish National Party and UKIP.
After all planned manifestos have been released, voters will have a chance to decide which party best represents their beliefs.
If polling data shows a significant dip in Conservative support as the June election draws near, the Pound could slide against the New Zealand Dollar. This is due to the Conservatives representing the ‘status quo’ and a known quantity, compared to the untested plans offered by other political parties.
That said, traders may mellow in their outlooks as more manifestos come out. This is especially true after Labour finally answered the ‘Brexit question’, confirming that they will take the UK out of the EU.
The New Zealand Dollar may face high volatility in the future, depending on how the national housing market fares.
A recent Goldman Sachs report estimated a 35-40% chance of the housing market going ‘bust’ in the next two years; Goldman’s definition of ‘bust’ is a drop of 5% or more in house prices.
In the short-term, a housing price slide would benefit those in New Zealand looking to get a foot on the property ladder. Over a longer period, however, it could cause significant economic turmoil due to falling house prices causing lower spending and higher saving.
This would impose a limit on NZ economic activity and could lead to a slump in national retail sales.
Confidence would also be damaged by a house price slump, as those looking to sell would take in less profit than before the price drop.
While it might not put the NZ economy into a recession, signs that house prices are consistently falling may be enough to panic traders and lower NZD demand.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading up at 1.8758 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading down at 0.5328.
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