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Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: Will the UK Recover from Deflation?

New Zealand Dollar Currency Forecast

During Friday’s European session, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate strengthened by around 0.28%.

The Pound advanced on Friday versus many of its peers after annual construction output bettered estimates. The Office for National Statistics (ONS) stated that a new method of calculating construction costs and prices caused them to upwardly revise previous outputs throughout 2014 and in the first-quarter of 2015. This meant they also upwardly revised Gross Domestic Product throughout that period.

After the Reserve Bank of New Zealand (RBNZ) cut the benchmark interest rate, the New Zealand Dollar slumped. Friday saw the ‘Kiwi’ (NZD) continue to trend lower amid speculation of further rate cuts in response to weak growth, inflationary pressure and ‘Kiwi’ overvaluation.

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending in the region of 2.2184 during Friday’s European session.

Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate, Consumer Price Index in Focus

Over the coming week there will be several influential domestic data publications to provoke volatility for the British asset. However, most traders will be looking towards Tuesday’s inflation data. The Consumer Price Index dipped into negative territory previously, a drop which was predicted by Bank of England (BoE) officials. BoE Governor Mark Carney stated that deflation was temporary and nothing to be concerned about. It will be interesting to see whether Carney was right or whether deflation deepens.

Chancellor George Osborne was quick to praise the dip into deflation, stating that it would be good for British spending. With that in mind, Thursday’s Retail Sales data will be of interest to see whether British consumers shared his view, or whether the slow pace of wage growth will hinder consumer spending.

New Zealand Dollar (NZD) Exchange Rate Forecast to Soften on Market Sentiment

Given that the situation in Greece is far from resolution, trader risk-appetite is likely to remain weak throughout the course of the coming week. A reluctance to invest in high-yielding assets could be exacerbated with Greece’s loan deadlines fast approaching.

For those invested in the ‘Kiwi’, New Zealand’s Gross Domestic Product data will be of most significance. Reserve Bank of New Zealand Governor Graeme Wheeler stated that further interest rate cuts could be a possibility if the ‘Kiwi’ remains overvalued, inflationary pressures continue and growth remains lacklustre. Therefore, the growth data will be particularly significant as an early indicator of whether the central bank will ease policy further down the line.

In addition to the British data already mentioned; Claimant Count Rate, Jobless Claims Change, Average Weekly Earnings, Unemployment Rate, Employment Change, Bank of England Minutes, Public Finances, Central Government NCR, Public Sector Net Borrowing and PNSB ex Banking Groups may be of interest to those trading with the Pound Sterling.

As well as the data pertaining to New Zealand already mentioned; Performances of Services Index, Current Account, Current Account Deficit to GDP Ratio, ANZ Job Advertisements and the ANZ Consumer Confidence Index could provoke ‘Kiwi’ movement.

As well as geopolitics in Greece provoking New Zealand Dollar volatility, US Dollar movement will also be of significance.

During Friday’s European session, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within the range of 2.2097 and 2.2274.