GBP/NZD Forecast to Decline Further as NZ Firms Grow in Confidence
The pound to New Zealand dollar exchange rate (GBPNZD) could be entering a new downtrend as the NZD's outlook improves.
Following months of break-neck gains the pound to New Zealand dollar exchange rate (GBPNZD) has recently entered a downward slope.
Since mid-September the outlook for the pair has deteriorated, and there are signs that losses could extend.
From a fundamental stance we note that New Zealand businesses are more optimistic about their own trading conditions (read below) while the global financial picture has improved with commodity prices and stock markets rallying.
Taking a technical view on the GBPNZD outlook we see further downside potential as momentum indicators turned negative.
The exchange rate has fallen below the 100 day moving average, presently seen at 2.36, in what represents a significant deterioration for those waiting for better exchange rates.
The downside move could well extend further towards the 2.30 support zone which was last in play in July 2015.
Economic Backdrop Improves for the New Zealand Dollar
It would seem that the fundemantal backdrop that is the New Zealand economy is turning more supportive of a stronger NZ dollar.
We have reported this before and believe that a turnaround in fortunes for the kiwi is a growing theme amongst those analysts we follow.
The New Zealand Institute of Economic Research's (NZIER) have released their latest Quarterly Survey of Business Opinion (QSBO) and have reported that firms were more confident about their own business outlooks than they were in the June quarter.
Latest Pound / New Zealand Dollar Exchange Rates
  | Live: 2.3118▼ -0.04%12 Month Best:2.3553 |
*Your Bank's Retail Rate
| 2.2332 - 2.2424 |
**Independent Specialist | 2.2794 - 2.2887 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
While the headline business confidence readings show confidence is down (net 9% of firms expect trading conditions to get worse) it is the observation that New Zealand businesses are paradoxically increasingly confident about their own activity.
A net 17% of New Zealand firms are expecting improved trading conditions.
In response to the findings, one of New Zealand's key investment bank and research houses, BNZ, have suggested they are going to have to upgrade their forecasts for the economy:
"When the world is still drowning in uncertainty and the domestic economy is being pummeled by a struggling dairy sector, it is surely remarkable that the aggregate findings from your key business survey reveal an economy where: growth is around trend; investment and employment intentions remain positive; and profits are rising.
"At the margin, the survey suggests that we should be revising upward our growth forecasts and downward our inflation expectations. We won’t for the time being but the pressure is most certainly there."
The immediate-term outlook for the NZD will rest on the upcoming dairy auction tonight.
Futures suggest another double digit leap.
RBNZ Assistant Gov speaks Fri (Chamber of Commerce) ahead of Sept credit card spend data (mkt +0.4%).
