GBP/NZD Rate: Forecast for the Next Five Days
The GBP/NZD exchange rate has pulled-back over the last few weeks on the back of a continued broad-based recovery in the New Zealand Dollar.
The pair has fallen from a temporary peak at 1.8975 to its current level at around 1.80.
Now it is sitting on a major support level at the neckline of the previous double bottom reversal pattern.
There is now a possibility the pair could stall, consolidate, bounce – possibly even reverse trend completely and start to move higher.
The occurrence of the double bottom, is a bullish sign despite the current correction which is very steep.
We wait for more confirmation before more detailed forecasts can be made.
Data to Watch for the New Zealand Dollar
The most important release in the week ahead is the fixing of dairy prices at the Global Dairy Trade auction on the morning of Tuesday, June 6.
Dairy prices have already risen robustly this year and a further strong print will solidify these gains and support the New Zealand Dollar, since whole dry milk powder is the county’s largest export.
The Kiwi has been outperforming the opposition as a result of the positive assessment contained in the RBNZ’s Financial Stability Report last week, which noted “fewer systemic risks,” according to ING’s Chris Turner.
Turner goes on to note, however, that there are few major releases in the week ahead:
“There is no major NZ data this week (RBNZ on June 21st) and Friday's NFP report, showing headline employment growth, but steady price pressures, should keep carry currencies in demand. NZ short term rates high at 1.75%.”
The currency is viewed as having a favourable outlook despite a dearth of data as positive past data suggests more upside.
“The New Zealand dollar on the other hand closed in on a 3-month high thanks to the ongoing improvements in New Zealand’s economy. Increases in the terms of trade and activity indices helped to bolster business confidence in May,” said Kathy Lien, managing director at BK Asset Management.
Data, Events to Watch for the Pound
The key event for Sterling is the general election on Thursday, June 08.
Most commentators expect a Conservative win but Labour has recovered to within 3% of the Tories in the polls from over 20% behind three weeks ago and there is now a threat of there being a hung parliament.
“A failure to secure a more comfortable margin of seats (17 as of now) would weaken May’s position going into Brexit talks,” said NBF Economics Strategy.
A small majority would lead to the Pound weakening – only a majority of about over 30 would help Theresa May in negotiations and support Sterling according to ING.
“We think were Theresa May's government to increase its working majority into the 30-50 seat area in Thursday's vote, GBP could enjoy a very modest bounce,” ING’s Chris Turner.
“The main risk to GBP is an even smaller Conservative majority or a hung parliament. This would send EUR/GBP to 0.89 and USD/GBP to 1.26,” continued Turner.
Other major data releases, including PMI’s are likely to be completely overshadowed by Thursday’s election.
But we will be watching the release of Service PMI data from IHS Markit and the CIPS on Monday.
Construction and Manufacturing PMI data have both surprised to the upside and confirm that the UK economy is seeing activity accelerate in the second-quarter of 2017.
Recall the first-quarter only saw growth rise by 0.2%.
The services sector accounts for in excess of 80% of UK economic activity therefore we must see a similar beat on expectations in this sector to confirm the economy is picking up speed again.
Analysts are forecasting a reading of 55.0.
