Will UK Inflation Rate Slowdown Trigger GBP/NZD Exchange Rate losses?
This is a negative start to weekly trading, although looking back the GBP/NZD exchange rate is still near its highest level since July 2016.
Pound Sterling is at risk of declining against the New Zealand Dollar on Wednesday this week, when UK inflation rates are tipped to show a year-on-year slowdown.
If August’s annual reading does drop from 2.5% to 2.4%, the Pound could fall in value because of the negative implications for future UK interest rates.
Lower inflation puts less pressure on the Bank of England (BoE) to raise interest rates, so a forecast-matching annual slowdown could disappoint GBP traders.
It should be stressed that an annual slowdown isn’t guaranteed – if inflation rises instead then the Pound could also appreciate against the New Zealand Dollar.
Risk of High GBP/NZD Exchange Rate Volatility on EU’s Brexit Summit
Looking further ahead this week, the Pound to New Zealand Dollar exchange rate could turn volatile when EU leaders hold an emergency summit on Thursday.
Taking place in Salzburg, this meeting will bring together UK and EU negotiators and will ideally result in clear progress in Brexit talks.
Discussions have been stalled for months and with the provisional November deadline looming on the horizon, GBP traders are looking for any signs of fresh progress.
Austrian Chancellor Sebastian Kurz has spoken against the UK leaving the EU without a deal, but there are still major stumbling blocks that need to be overcome.
These include the state of the Irish border, how the UK can trade with other nations after Brexit and how much the UK will pay the EU as part of its Brexit ‘divorce bill’.
If the talks appear to be productive and attendees report clear progress towards a Brexit deal then the Pound could rise against the New Zealand Dollar.
Are NZD/GBP Exchange Rate Losses ahead on Falling Global Dairy Prices?
The New Zealand Dollar (NZD) might fall sharply against the Pound (GBP) on Tuesday, when the latest measure of global dairy prices comes out.
Measured by the Global Dairy Trade price index, dairy prices are tipped to drop by -1%; such a result could drain NZD trader confidence and weaken the currency.
New Zealand has a well-developed dairy farming industry that relies on overseas exports, so a drop in prices would disadvantage farmers and sellers across the country.
There is an additional risk of NZD/GBP exchange rate losses when a Q3 Westpac consumer confidence reading comes out late on Tuesday – this is tipped to decline.
Lower consumer confidence levels could lead to reduced consumer spending and economic activity, which ultimately poses a risk to national GDP growth.