WILLING TON: The Pound New Zealand Dollar (GBP NZD) exchange rate surged higher this week in response to the disappointing fourth quarter New Zealand consumer price index data. In a discouraging development for the NZD outlook inflation in the fourth quarter clocked in at just 0.1% on the quarter, highlighting the persistent lack of domestic price pressures. This encouraged investors to pile out of the New Zealand Dollar even as the mood towards the US Dollar soured further and general market risk appetite increased. Confidence in the Pound, meanwhile, picked up as better-than-expected UK wage data prompted bets of an imminent Bank of England (BoE) interest rate hike. Sterling found an extra boost on Friday as the fourth quarter UK gross domestic product data bettered forecast, clocking in at 0.5% on the quarter rather than holding steady at 0.4%. This modest improvement encouraged investors to support GBP exchange rates, raising hopes that the UK economy entered 2018 with stronger momentum. Even so, the GBP/NZD exchange rate could find further support in the coming days if January’s UK PMIs point towards resilient levels of economic growth. Any downside surprises, however, are likely to weigh heavily on the Pound as confidence in the outlook of the domestic economy remains fragile at best. The latest UK net consumer credit figure could also provoke volatility for the Pound on Tuesday, with any rise in credit likely to discourage the BoE from considering an interest rate hike Confidence in the New Zealand Dollar could pick up in the coming week, meanwhile, if December’s trade data shows an improvement. Any narrowing of the trade deficit is likely to encourage at least some degree of optimism with regards to the domestic outlook, especially if driven by an increase in export volumes. However, the appeal of the New Zealand Dollar is still likely to be tempered by the disappointing nature of the fourth quarter inflation report.
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