The Pound has fallen slightly against the New Zealand Dollar today and could make even greater losses on the coming week’s wage data.
Pound to New Zealand Dollar Outlook: Losses Possible on Poor UK Wage Growth
In the near-future, the Pound may be affected by statistics for UK average earnings in August.
The data, out on October 18th, is predicted to show a slowdown from 2.1% to 1.67% for average wages including bonuses.
Such an outcome would see the gap between wage growth and inflation widen instead of narrowing, which could lower the chances of a Bank of England (BoE) interest rate hike.
In recent months, the BoE has been paying close attention to the correlation between wages and inflation, when considering monetary policy.
If the wage squeeze worsens because of an expanding gap between the two measures, the BoE may hold off on an interest rate hike this year. This would be because raising interest rates at such a time would worsen the situation for low-income and high-debt households.
Such a prospect could weaken the Pound, leading to greater GBP NZD losses.
New Zealand Dollar Forecast: Will NZD Rally on Coalition Declaration?
Looking ahead, the New Zealand Dollar could turn volatile on Thursday going into Friday, depending on political announcements.
Since the general election in late September, New Zealand has been without an official government. This is because the third largest party, New Zealand First, has been deciding whether to form a majority coalition with the National Party or Labour Party.
NZ First leader Winston Peters has been keeping spectators guessing, stating that;
‘Our target is to complete all these discussions by Thursday night – nothing’s changed. We’ve got a few logistical things to work out but [there should be news] as soon as possible after that’.
Despite this apparently tight timetable, when asked if there would be a coalition by Friday Peters denied such an outcome;
‘I’ve got other arrangements and people to first of all organise themselves and ourselves as well. [It] depends on other parties [and I can’t] answer for them’.
If Peters backs the Nationals, who have been in government since 2008, the New Zealand Dollar could rally.
This would not be out of any inherent support for the Nationals, but because a Labour coalition would instead represent an unknown quantity.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.8664 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5356.