Pound v New Zealand dollar: GBP down against NZD despite narrowing NZ trade surplus
THE pound New Zealand dollar exchange rate softened by around half a cent in early trade this morning ahead of the Bank of England’s (BoE) latest financial stability report.
Sterling is currently trading at NZ$1.740 against the New Zealand dollar, down 0.39 per cent from its starting levels and down by around a cent from the high of NZ$1.753 struck yesterday.
The pound remained subdued this morning as investors await the BoE financial stability report, with many analysts expecting that the bank will issue further warnings over the dangers of Brexit and its likely impact on the UK economy.
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Another area in which the bank is likely to express concern is over the build-up of consumer credit as it rises to a level not seen since the financial crisis, with families forced to borrow even more to make ends meet.
Sterling was also hit this morning by a drop in British consumer confidence, with pollsters at YouGov claiming that household sentiment has been hit hard by the unexpected result of the general election.
UK enjoys Brexit tourism boost thanks to weak pound
The real cause for alarm will be the cooling of the property market
The report suggests that the hung parliament has burdened consumers with further political uncertainty on top of worries about rapidly rising inflation, anaemic wage growth and the state of the housing market.
In his accompanying statement Stephen Harmston, head of YouGov, said: “The hung parliament seems to have further dampened consumers’ spirits, which were already sinking following the continued squeeze on household finances.
“But the real cause for alarm will be the cooling of the property market, as this is one of the key things that has propped up consumer confidence over the past few years.”
Economists forecast that June’s Gfk confidence data will confirm the YouGov report when it is released on Friday, with expectations that the index will slip back from -5 to -7.
Meanwhile the New Zealand dollar was strengthened this morning by a marked rise in risk appetite, with investors flocking to the currency in the market lull ahead of a slew of central bank speeches later today.
The currency had previously declined as New Zealand’s trade surplus was shown to have narrowed by considerably more than forecast, slipping from 536m to 103m.
The NZD rebound reinforced by the continued rally in oil prices, which reflected positively over the commodity market as a whole.
Looking ahead, the GBP/NZD exchange rate may meet some volatility on Thursday with the release of the UK’s latest housing data, which may weigh on the pound especially if Nationwide reports that house prices failed to grow again in June.
Meanwhile, the New Zealand Dollar may find more strength in the second half of the week with the release of the latest domestic business confidence figures with some analysts predicting that business sentiment will have risen over the last month.
