NZ dollar drops to 4-year low vs. British pound after upbeat retail data

File photo / NZ Herald

The New Zealand dollar fell to a four-year low against the British pound after UK retail sales rose more-than-expected in April, boosting optimism about the outlook for the economy.

The kiwi touched 46.52 British pence, and was trading at 46.78 pence at 8am in Wellington, from 47.14 cents at 5pm yesterday.

The local currency was little changed at 73.28 US cents from 73.34 cents yesterday.

The pound strengthened after a report showed British retail sales volumes rose 1.2 per cent in April from March, ahead of the 0.4 per cent expected gain and the biggest monthly increase since November.

That boosted optimism the UK economy may accelerate in the second quarter, after growth edged up just 0.3 per cent in the first quarter, and stokes speculation the Bank of England may hike interest rates sooner.

"UK retail sales blew past estimates showing strong pickup in consumer demand which helped to lift (the) pound," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, in a note titled 'Pound Pops as UK Retail Rocks'.

Schlossberg noted that some of the retail strength was underpinned by falling prices, with average prices falling 3.2 per cent from the year earlier, led by an 11.5 per cent decline in energy costs.

"Some of those declines are unlikely to repeat themselves as oil prices have moderated, but the fact that the UK consumer is clearly happy to increase spending in the wake of higher wage growth and lower gas prices is good news for the UK economy and welcome sign for the BoE," he said.

"The transmission mechanism of higher wage growth and better spending is likely to expedite the normalization process for BoE and traders reacted positively to the data."

In New Zealand today, Finance Minister Bill English and Labour leader Andrew Little are scheduled to speeches this morning, following the government's 2015 Budget yesterday.

Later in the day, the ANZ-Roy Morgan consumer confidence survey for May is due for release at 1pm.

In the US tonight, traders will be eyeing inflation data for April and a speech by Federal Reserve chair Janet Yellen on the economy.

The New Zealand dollar advanced to 92.81 Australian cents from 92.71 cents yesterday, slipped to 88.66 yen from 88.75 yen ahead of the Bank of Japan policy review today, and was little changed at 65.93 euro cents from 65.94 cents.

The trade-weighted index edged lower to 75.89 from 75.94 yesterday.