- Pound to New Zealand Dollar fluctuates around 1.7580 – New Zealand Dollar to Pound rate hits 0.5706
- UK GDP Growth Slows as Expected – Pound New Zealand Dollar Unmoved
- New Zealand Trade Balance Beats Expectations – Hits Fourth Consecutive Monthly Surplus in a Row.
The Pound to New Zealand Dollar exchange rate fluctuated this morning as UK GDP growth was revealed to have slowed.
Britain’s economy grew by 1.7% year-on-year in Q2, dropping from the 2% growth rate recorded in the previous quarter.
Quarter-on-quarter growth also matched the consensus, coming in at 0.3%, slightly up from the previous figure of 0.2%. This marks the second slowest growth rate since the start of 2016.
On the industrial production front, manufacturing demonstrated a fall of 0.4% whilst construction fell 0.9%. The services sector, however, showed some improvement, with film production, distribution and retail being the primary drivers.
The Office for National Statistics (ONS) stated:
‘In Quarter 2 (Apr to June) 2017, UK GDP was estimated to have increased by 0.3%. The services aggregate was the main driver to the growth in GDP, contributing 0.42 percentage points’.
Sterling, however, did not see a large dip against the New Zealand Dollar, primarily because the results were so close to the consensus.
GBP NZD Fluctuates as New Zealand’s Trade Balance Beats Expectations
Yesterday Statistics New Zealand revealed that New Zealand’s trade balance posted its fourth consecutive surplus in June, primarily driven by rising dairy exports.
The antipodean nation’s merchandise trade surplus hit a whopping NZ$242 million last month, smashing forecasts.
International Statistics Senior Manager Daria Kwon stated:
‘The milk powder, butter, and cheese group continues to be a key export commodity, and accounts for over a quarter of our total exports.’
Whilst dairy exports were the main surplus contributor, surging car imports were one of the most significant drains, topping NZ$500 million in June – up 7.7% from the previous year.
New Zealand’s trade surplus is good news for the ‘Kiwi’, though its gains against the Pound as a result have been minor in light of comments from an RBNZ official.
RBNZ Official Suggests Weaker New Zealand Dollar (NZD) Could Rebalance Economy
The GBP/NZD exchange rate was relatively unmoved by New Zealand’s trade report as remarks from Reserve Bank of New Zealand Assistant Governor John McDermott countered the data’s positive impact.
McDermott stated on Wednesday that, if anything, a weaker ‘Kiwi’ could help rebalance New Zealand’s economic growth.
McDermott said:
‘From a growth point of view, a lower real exchange rate would help rebalance growth towards the tradables sector, especially as not all traded industries are benefiting from the current high terms of trade’.
The ‘Kiwi’ being so strong essentially makes the export and sale of New Zealand products and goods abroad even harder, and with New Zealand’s inflation levels remaining low, there are murmurings that interest rate cuts could be warranted to weaken the domestic currency and rebalance the economy.
This possibility has weighed on the New Zealand Dollar somewhat, especially after McDermott’s speech.
The data calendar for the rest of this week remains sparse for this pairing.
External factors (like this evening’s Federal Reserve interest rate decision) are therefore likely to drive the GBP/NZD exchange rate. With Brexit uncertainties continuing to weigh on Sterling and UK growth remaining sluggish, the ‘Kiwi’ may well consolidate its gains against the Pound, ending the trading week on top.
Next week will see the fortnightly New Zealand Dairy Auction and New Zealand’s employment data as well as some PMI figures for the UK.
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