The Pound to New Zealand Dollar Forecast for the Week
GBP/NZD extended its sell-off last week despite contrary data bringing into question the superiority of the Kiwi over the Pound.
NZD strengthened (so GBP/NZD fell) through the negative news that China’s credit rating had been downgraded a notch, as positive news from the New Zealand dairy cooperative Fonterra suggested a rebound in the market.
It has mainly been Brexit fears rearing their head again which decided the direction of GBP/NZD after the EU threatened the UK with a 100bn divorce bill, and Theresa May saw her lead fall to only 5.0% in the polls.
GBP/NZD has now fallen to lows of 1.8093 after cutting through the 50-day Moving Average (MA) at 1.8266.
Unfortunately, further downside could be stymied by the trendline (B) at 1.8050 which is likely to provide substantial support to the exchange rate, leading to it stalling or even bouncing.
MACD is falling but not yet below the key zero-line which identifies the trend.
Data for the New Zealand Dollar
The first major release for NZD in the week ahead is Terms of Trade, which is the difference in the aggregate value of exports to imports and is forecast to show a 3.9% trade surplus when it is released at 23.45 B.S.T on Wednesday.
Any disappointments here could hurt the New Zealand Dollar's current run higher.
The other major release is Business Confidence in May out at 02.00 B.S.T on Wednesday.
Also keep an eye on the Reserve Bank of New Zealand's Governor wheeler who speaks at 02:10 B.S.T.
The Reserve Bank’s (RBNZ) biennial Financial Stability report is also out on Wednesday which is forecast by some to have a bearish impact on the Kiwi as it is likely to highlight risks to the economy.
The last report flagged up the overheating housing market and weaknesses in banking which weighed on NZD, and this report is more likely than to do the same.
“The other major highlight this week is Wednesday's release of the semi-annual Financial Stability Report. In the last release the RBNZ were concerned with: a) an over-extended housing market and b) NZ banks dependence on the wholesale funding markets. We see downside NZD risks from this report,” says Petr Krpata at ING.
Data for the Pound
UK data picks up towards the end of the week when the new month begins.
Manufacturing PMI for May is out at 9.30 B.S.T on Thursday, and Construction PMI, out at the same time on Friday.
Manufacturing activity is expected to fall to 56.5 from 57.3 – only a deeper decline, however, would be market moving.
Last month Manufacturing PMI reached a 3-year high on the back of a surge in New Orders so the overall view supports a shallower decline if anything.
“We look for PMI to hold onto most of last month’s gains with just a small pull-back 57.0,” said Canadian investment bank TD Securities.
A similar marginal decline to 52.7 from 53.1 is foreseen in construction activity in May, out on Friday, June 2.
House Prices are also out at 7.00 on Thursday.
Of probably more import in terms of sterling’s fluctuations are poll results for the up-and-coming June elections.
The Pound weakened last week after Theresa May’s lead over the Labour party was cut to only 5% from 19%, as the possibility of her having a powerful majority declined.
