Brexit Jitters Weaken Pound New Zealand Dollar (GBP/NZD) Exchange Rate
The latest signs of dissent within Theresa May’s government and fresh jitters over Brexit confined the Pound to New Zealand Dollar (GBP/NZD) exchange rate to a narrow trend at the start of the week.
Murmurs of discontent over the Prime Minister’s leadership put the Pound (GBP) under pressure once again, with the absence of any new domestic data leaving GBP exchange rates generally lacking in support.
As Connor Campbell, financial analyst at Spreadex, noted:
‘Add onto that the Lords constitution committee labelling the EU withdrawal bill as ‘fundamentally flawed’ just one day before the legislation is set to be debated, alongside a warning from EU leaders that the UK is ‘not ready’ to secure a divorce deal, and there was plenty for the previously soaring pound to fret about.’
However, with market risk appetite diminishing in response to a stronger US Dollar (USD) the weakness of the GBP/NZD exchange rate was somewhat mitigated.
Narrowed NZ Trade Deficit Forecast to Boost NZD Exchange Rates
Increased volatility is likely in store for the GBP/NZD exchange rate on the back of December’s New Zealand trade data, which may boost confidence in the domestic outlook.
The New Zealand Dollar (NZD) could find a strong rallying point if the trade deficit is found to have narrowed significantly on the month, especially if any improvement is driven by rising exports.
A strong showing here might encourage investors to pile back into the antipodean currency, even if any positive result is unlikely to be enough to alter the current policy outlook of the Reserve Bank of New Zealand (RBNZ).
On the other hand, a widened trade deficit could weigh heavily on NZD exchange rates this week.
With the wider sense of market risk appetite likely to remain muted, given ongoing worries over potential US trade wars, support for the New Zealand Dollar may be relatively limited in the near term.
GBP/NZD Exchange Rate Forecast: UK Consumer Credit and PMIs in Focus
Speculation over the possibility of the Bank of England (BoE) raising interest rates again sooner rather than later could boost the GBP/NZD exchange rate.
Particular focus will fall on December’s UK net consumer credit, given that policymakers have previously expressed concern over the measure.
Any dip in consumer credit levels could encourage the BoE to adopt a more hawkish policy outlook in the coming months.
However, reduced household reliance on credit may also signal a general reining in of consumer spending; something which would be detrimental to the health of the wider UK economy.
January’s raft of PMIs could also offer the GBP/NZD exchange rate a rallying point, providing that the economy shows signs of maintaining its momentum at the start of 2018.