- UK Data in the Red – Production figures and trade deficit disappoint
- US Data Boosts Risk-Off Sentiment – Jobless claims dropped by around -9000
- Dairy Auction Price Improvement – Investors hopeful for commodity future
- Forecast: BoE Rate Decisions Next Week – New Zealand Data Limited
Despite huge risk-off gains made earlier this week, the GBP/NZD pair floundered and became indisposed as the week drew to a close with the foreign exchange market favouring giants such as the US Dollar.
Starting from a weekly low of 2.0596, the pair reached a weekly high of 2.1002 on Tuesday before falling on ‘Brexit’ concerns, poor British data and positive New Zealand commodity news. The pair currently fluctuates in the region of 2.0750.
The pair’s hugely erratic movement this week has been largely due to the headline ‘Panama Papers’ scandal making investors wary of riskier currencies like the New Zealand Dollar, before Britain itself was dragged into the scandal amid an alleged connection to Prime Minister David Cameron’s family.
Negative UK Deficit and Manufacturing Production Figures Hurt Sterling (GBP)
This morning the Office for National Statistics added to the weight already piling on the Pound.
Britain’s February trade balance data showed that the deficit narrowed by disappointingly less than expected, coming in at -£4.84b from -£5.23b and undercutting forecasts of -£3.40b.
The BBC reports that the goods trade deficit has reached -£12 billion. The trade deficit with the EU, on the other hand, has worsened to a record high of -£8.6b.
February’s Production data also hurt the battered Pound, with year-on-year manufacturing production printing at -1.8% and industrial production worsening by -0.5% from February 2015.
Poor data across production reflects the severity of Tata Steel’s losses. The Indian steel production company announced last week that it would be pulling out of UK operations due to losses of -£1m a day.
Even with prior knowledge of the industry’s struggles however, the drop in production has been described by some analysts as shocking
Unlucky New Zealand Dollar Hit by Risk-Off Week Despite Positive Commodity News
Risk seems to have been officially off the table over the past week, with a number of factors contributing to the increased appeal of ‘safe-haven’ currencies.
As mentioned, the ‘Panama Papers’ leak gripped the globe earlier this week as investors settled in safer markets to wait for the scandal to blow over. They also avoided currencies of nations dragged into the debates, like the Pound.
The lack of appetite towards riskier commodity currencies like the ‘Kiwi’ only continued as the week progressed when considerably positive jobless data, and Federal Reserve optimism, increased the appeal of thesafe-haven US Dollar.
Fed Chairwoman Janet Yellen spoke in New York yesterday, praising the progress the US economy has made since the recession despite struggles in other parts of the globe. While still cautious towards interest rate hikes, her confidence in the US economy’s health bolstered USD favour and left riskier currencies in the dust.
This follows optimistic dairy auction prices revealed earlier this week. The price of New Zealand’s most lucrative export hopped up 2.1% (its most significant increase since December 2015) to reach an average price of $2,188.
While still below 2015 price levels, the news briefly inspired confidence in the future of the commodity and boosted NZD favour earlier this week.
Unfortunately not all New Zealand export data has been positive as analyst debates on New Zealand fish stocks intensify. Radio New Zealand (RNZ) reports that fish stocks may be far lower than official figures claim.
Pound Sterling to New Zealand Dollar Exchange Rate Forecast: GBP/NZD Could Fluctuate Until BoE Rate Decision
Less than a week from now, the Bank of England (BoE) is set to meet and deliver its latest interest rate and asset purchase decisions.
While the key interest rate is currently forecast to remain held at 0.50%, confidence in the UK economy has plummeted over the last month as ‘Brexit’ arguments heat up and over 10,000 jobs in the steel sector face closure.
Potential comments on how the UK economy may proceed going forward could also reignite ‘Brexit’ fears after the BoE previously stated a ‘Brexit’ would be the single biggest risk to the economy.
Key British CPI releases for March are also due next week. Worse-than-expected inflation would likely harm Sterling further following this week’s disappointing data.
New Zealand data, on the other hand, is set to be quiet next week, besides card spending retail information and March’s performance of manufacturing index print.
The ‘Kiwi’ is likely to be influenced by any further changes in risk sentiment. While currently off, exciting commodity news or disappointing US news could push investors towards the risky commodity bloc.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate currently trends around 2.0750 while the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate trends in the region of 0.4817.
Comments are closed.