Strong NZ Trade Dents Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate continued to lose ground on Friday morning after March’s New Zealand trade data bettered forecasts.
Investors were pleasantly surprised as the New Zealand trade surplus swelled from 12 million to 922 million in the last month, driven by a sharp increase in export volumes.
Exports rose to a record high at 5.7 billion, suggesting that trade conditions have continued to improve and benefit the domestic economy.
This saw the New Zealand Dollar (NZD) trending higher across the board ahead of the weekend, also finding strength on the back of an improved ANZ consumer confidence index.
However, NZD exchange rates could struggle to hold onto this positive momentum as worries over the economic outlook remain.
As Miles Workman, senior economist at ANZ, commented:
‘Looking forward, we expect to see ongoing broad-based strength in export values. But in seasonally adjusted terms, it appears much of the pipeline strength for volumes is now working its way through the trade data, suggesting positive net exports contributions to GDP growth are poised to fade heading into mid-2019.’
Nine-Month High in UK Mortgage Approvals Benefits Pound Sterling (GBP)
Pound Sterling (GBP) found some support, however, as UK mortgage approvals unexpectedly rose to a nine-month high in March.
This suggests that the housing market is picking up again as households shrug off lingering Brexit-based uncertainty.
While this may not be enough to shore up growth in the wider UK economy the solid improvement gave GBP exchange rates a lift on Friday morning.
The report also indicated that consumer credit growth picked up in the last month, accelerating to 4.1% on an annual basis.
With borrowing on the increase confidence among UK consumers appears to be picking up once again, benefitting from the latest delay to the Brexit deadline.
Even so, this was not enough to lift the GBP/NZD exchange rate out of a downtrend in the face of the strong New Zealand trade data.
GBP/NZD Exchange Rate Vulnerable to Signs of BoE Caution
Comments from Bank of England (BoE) Governor Mark Carney could put fresh pressure on the GBP/NZD exchange rate next week.
If Carney signals any sense of caution over the outlook of the UK economy this could weigh heavily on demand for the Pound.
With the BoE looking set to leave monetary policy on hold for the foreseeable future, in large part thanks to Brexit uncertainty, any fresh signs of dovishness would leave GBP exchange rates exposed to downside pressure.
On the other hand, evidence that Carney maintains an optimistic view of the economic outlook may encourage the GBP/NZD exchange rate to return to a positive footing.
Any increase in market risk aversion could also help the Pound to recover some of its lost ground against the New Zealand Dollar.