Risk of Inflation Rate Acceleration Triggering GBP/NZD Exchange Rate Decline
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell on Monday and remains at risk of further losses in the coming days.
UK inflation rate data for April could cause additional Pound exchange rate losses, should it show rising prices during the month.
Higher inflation across the board could devalue the Pound, as it would suggest that the UK is at risk of seeing wage squeeze conditions once again.
This is when the pace of inflation exceeds the rate of wage growth, as such ‘squeezing’ household incomes and leading to reduced consumer spending.
The UK savings rate is predicted to pick up, which will further compound the difficulties for UK businesses if households are watching their wallets.
If inflation rates fall on Wednesday, however, the Pound could rally against the New Zealand Dollar because this would improve conditions for UK households.
Will GBP/NZD Exchange Rate Recover on UK Retail Sales Growth?
Following Wednesday’s UK inflation rate readings will be retail sales figures on Thursday.
These are predicted to show rising sales activity in April for the monthly figures, which could greatly reassure GBP traders.
The UK retail sector struggled earlier this year because of poor weather, so signs of a recovery in April might trigger a GBP/NZD exchange rate rise.
New Zealand Dollar to Pound Exchange Rate (NZD/GBP) could Rise if Cattle Disease Spreads
For New Zealand Dollar (NZD) traders, updates about the spread of a cattle-based disease in the country may cause a rise against the Pound (GBP).
An outbreak of Mycoplasma bovis risks reducing production among New Zealand’s dairy farmers, but could ultimately be beneficial for dairy prices.
The disease can cause a number of other diseases to strike infected cattle, which limits their ability to produce milk.
Although this isn’t ideal for dairy farmers, if less milk is being produced then dairy prices could rise due to reduced quantity.
The government is putting forward NZ$85m to treat the disease, but some agricultural analysts predict that this won’t be enough to stamp it out completely.
As such, if the disease continues to spread and dairy production is impacted, then the New Zealand Dollar could rise because of hopes for higher dairy costs.
NZ Trade Balance Boom could Ensure NZD/GBP Exchange Rate Rise
More immediately, the New Zealand Dollar to Pound (NZD/GBP) exchange rate could be affected on Wednesday when trade balance data is released.
Covering April, this is forecast to show a considerable shift from the deficit range at NZ$-86m to a surplus of NZ$470m.
New Zealand’s trade balance has historically been volatile, but such a rise could still boost confidence among NZD traders and trigger an advance against the Pound.