GBPNZD Market Outlook: Sentiment Worsens on Higher Retail Expenditures

Jul 19, 2021 02:56 PM ET
GBPNZD Market Outlook: Sentiment Worsens on Higher Retail Expenditures
  • NZ total expenditures rose 4.5% in Q2 2021 to $989 million as compared to the first quarter. 
  • The number of self-employed women in NZ increased 4.29% from 137,400 in Q4 2020 to 143,300 in Q1 2021.
  • The UK may seek to taper the monetary policy in its next meeting on August 5, 2021. 

The GBPNZD pair lost 0.64% and closed at 1.9671 on July 16, 2021. It had opened at 1.9797 and traded to a high of 1.9846 before tumbling down. On weekly analysis, the pair fell 0.92% after supermarket/ retail expenditures rose 4.5% to $763 million. Total expenditures had also risen 4.5% in Q2 2021 to $989 million as compared to the first quarter. 

Expenditures in New Zealand

Expenditures in New Zealand

Consumables had the highest card transactions in June 2021 at NZ$41,260,000 for the last quarter. Non-retail products excluding services came in second at NZ$31.4 million, while fuel took up NZ$10.18 million. Apparel had a decline in sales with expenditures at -NZ$18.11 million.  It was the only major sector that experienced a decline in sales. 

Among consumables, vegetable prices shot up 1.4% in June 2021 over a four-year analysis (since June 2016). On monthly assessment, vegetable prices gained 15% in June 2021. It was buoyed by the high prices of lettuce, cucumbers, and tomatoes, etc. The food price index in NZ increased 1.4% from a previous record of 1.4%.   

Employment equality

Self-employment among women in New Zealand rose 13.9% in March (YoY) to 143,500. 

Employment numbers among women in NZ

Employment numbers among women in NZ

The number of self-employed women increased 4.29% from 137,400 in Q4 2020 to 143,300 in Q1 2021. Since March 2016, the number of paid employees has risen by 75,800. A total of 2,758,000 workers were employed in the year-to-date (YTD) analysis leading to March 2021. Up to 8,600 people were added to the employment roll, with 24,700 registered as self-employed in their major jobs. 

Inflation 

New Zealand’s annual inflation characterized by the CPI gained 3.3% in June 2021. Quarterly inflation was at 1.3%. This increase was the highest inflation rise in a decade buoyed by the soaring house and petrol prices. 

New Zealand’s CPI

New Zealand’s CPI

The CPI for Q2 2021 (QoQ) beat estimates at 0.8% from a previous reading of 0.8%. Annual CPI figures at 3.3% beat the consensus estimate at 2.8% from a prior record of 1.5%. 

The last inflation peak was in June 2011, when it rose to 5.3. The increase was driven by the goods and services tax (GST) rise of 2.5% points. It had taken effect in October 2010, 2 years after the global financial depression, where the annual CPI in NZ had risen to 5.1%. 

In Q2 2021, new house construction costs in NZ shot up 4.6% in the quarter against an increase of 7.4% YoY. The country has been plagued by supply disruptions for building materials against the rising demand for houses. The year leading to May 2021 saw NZ$18.3 billion worth of residential building labor consented by the government, indicating an increase of 18% from 2020. 

Tighter UK monetary policy

The UK's unemployment rate for May 2021 (MoM) rose 4.8% from an earlier reading of 4.7%. Employment change in the three months leading to May 2021 also saw a 77.87% decline to 25,000 from a prior reading of 113,000. 

Out of its £875 billion worth of gilts, the Bank of England (BoE) has been left with a purchase balance of £60 billion. It may seek to taper the monetary policy in its next meeting on August 5, 2021. 

Technical analysis

The GBPNZD pair is trending below the 9-day EMA at 1.9765 on the increased volume.

GBPNZD chart

The decline may result in the price hitting lows of 1.9500. 14-day RSI at 48.32, showing a neutral momentum. Failure of the pair to decline lower may push prices to highs of 1.9908. 

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