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GBP NZD Tumbles to 9-Week Low on ‘Hard Brexit’ Likelihood

Posted by on January 10th, 2017. Connect with us on .

GBP to NZ Dollar

The GBP NZD exchange rate has bounced off a nine-week low today, despite continued fears that the UK is heading for a ‘Hard Brexit’.

Perfect Run of Forecast-Beating PMIs Fails to Buoy GBP NZD

Last Tuesday saw the GBP NZD exchange rate weaken despite positive data for the UK and bad news for New Zealand. The UK manufacturing PMI defied expectations that it would creep marginally lower to 53.3, instead rising from 53.4 to 56.1. Meanwhile, the latest auction saw dairy prices slump 3.9%.
But investors were shocked by the sudden resignation of top UK-EU ambassador Sir Ivan Rogers, who commented in an email to staff that the government lacked the experience and plan to negotiate Brexit. This saw GBP NZD close the session nearly back at opening levels.
The following few days saw choppy trade, with the Pound New Zealand Dollar exchange rate edging slightly lower over the course of the week. UK construction, services and composite PMIs all repeated manufacturing’s trick of trouncing forecasts. But the dovish outlook for consumer spending and the continued uncertainty surrounding the impending triggering of Article 50 prevented GBP gaining despite barely any domestic data from New Zealand to support NZD.

Chinese Inflation Slowdown Helps Slow GBP NZD Losses

The Pound is declining virtually across the board today, as the fears of a ‘Hard Brexit’ sparked by Theresa May continue dragging the British currency lower.
However, the New Zealand Dollar has been unable to further capitalise on its 9-week high of around 0.57 due to an unexpected slowdown in the Chinese inflation rate. Consumer prices were expected to continue growing 2.3% in December, in line with November’s growth, but instead rose 2.1%.
Any signs of weakening demand in China pose a double threat to sentiment and outlook regarding the New Zealand Dollar. Firstly, China’s economy is teetering on the brink as the government attempts to transition away from being a manufacturing hub in order to drive growth. Secondly, if consumer appetite is weakening then demand from Chinese manufacturers who import materials and goods from New Zealand will also fall.

GBP NZD Exchange Rate Forecast to Vacillate on Largely Empty Data Calendar

Ecostats are poorly spread out this week meaning that, after tomorrow’s UK data slew, there is little to distract from Brexit fears. The data due tomorrow has a mixed forecast, with borrowing likely to have worsened in November, but industrial, manufacturing and construction output expected to have improved after falling in October. The NIESR GDP estimate for December will be released, with a mild uptick to 0.5% expected.

Thursday’s appearance before lawmakers by Bank of England (BoE) Governor Mark Carney is the last development on the UK calendar this week.
New Zealand data for the rest of this week is more spread out, but also in short supply. Later today will see the release of house prices and job advertisement data for December, tomorrow the truckometer and Thursday commodity prices and card spending. None of these releases is considered to be particularly impactful, unless the result is significantly off forecasts.

Next week promises much more GBP NZD exchange rate volatility, with Tuesday bringing the December consumer price index figures for the UK and the latest Global Dairy Trade auction results to influence the New Zealand Dollar.

Data Item Market Expectation
10th January 16.30 NZD QV House Prices (YoY) (DEC)
10th January 21.00 NZD ANZ Job Advertisements (MoM) (DEC)
11th January 09.30 GBP Total Trade Balance (Pounds) (NOV) -£3500
11th January 15.00 GBP NIESR Gross Domestic Product Estimate (DEC) 0.5%
12th January 14.15 GBP Bank of England Governor Carney to testify to Lawmakers
17th January NZD Dairy Auction Avg. Winning Price MT (JAN 17)
17th January GBP Consumer Price Index (YoY) (DEC) 1.5%
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