On the afternoon of 12th April, the Pound to New Zealand Dollar has seen a small rise of around 0.2%.
This appreciation follows the news that the European Central Bank (ECB) is not planning any near-term monetary policy adjustment.
This was revealed in the ECB’s monetary policy meeting accounts, which covered discussions from the latest congregation of policymakers.
The news has restored confidence among Pound traders, given that the rival Euro fell sharply after the accounts came out.
(First published 11th April, 2018)
Slowing UK Earnings Growth could Worsen Future GBP/NZD Exchange Rate
The Pound to New Zealand Dollar exchange rate (GBP/NZD) has remained steady on 11th April, but remains at risk of declining in the coming week.
The pace of average earnings growth in the UK has increased in recent months, but February’s figure with bonuses included is expected to slow.
The next wage growth readings will be out on 17th April and could damage the Pound if they show a slowdown in UK earning levels.
Coupled with a potential increase in inflation rates on 18th April, a UK wage growth slowdown could trigger a clear GBP/NZD exchange rate slump next week.
Additional Danger of GBP/NZD Losses if UK Diverges from EU Rules
Another factor that could negatively affect the future Pound to New Zealand Dollar exchange rate will be any signs of divergence from EU rules after Brexit.
A recent Confederation of British Industry (CBI) survey has found that most business leaders believe that diverging from EU laws will cause economic damage.
The conclusion was that while there would be small economic benefits from taking a different tact on EU rulings, for the most part there would be losses, not gains.
Summing up the CBI’s findings, Director-General Carolyn Fairbairn said;
‘The task of unpicking 40 years of economic and regulatory integration is complex and colossal.
‘It’s hard to overstate the importance of the decisions that will be taken over the next six months.
‘Put simply, for the majority of businesses, diverging from EU rules and regulations will make them less globally competitive, and so should only be done where the evidence is clear that the benefits outweigh the costs’.
If the UK government sets out plans to diverge from most EU rulings then the Pound to New Zealand Dollar exchange rate could preemptively dip due to trader concerns.
Chance of New Zealand Dollar to Pound (NZD/GBP) Exchange Rate Improvement on RBNZ’s McDermott’s Speech
There is a chance of a New Zealand Dollar to Pound (NZD/GBP) exchange rate rise on 12th April, when Reserve Bank of New Zealand (RBNZ) official John McDermott speaks.
Mr McDermott, Assistant Governor and Head of Economics, will be speaking on the subject of inflation targeting; this is a key factor in deciding future monetary policy.
The RBNZ’s longstanding inflation rate target has been between 1-3%; the most recent reading showed 1.6% inflation growth across the whole of 2017.
If Mr McDermott suggests that inflation levels might hit the mid-point of 2% or move closer to 3% in 2018 then the New Zealand Dollar could appreciate against the Pound.
Higher inflation raises the chances of RBNZ policymakers acting to reduce it, primarily by raising interest rates to increase saving and reduce spending.