The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate registered a +1.15% gain as Monday’s session continued and the price of copper fell to a five-year low on Chinese slowdown concern.
Copper dropped under $6,000 per metric tonne as concern over Chinese growth continued to weigh on the market.
Forecasts for only 7% Chinese growth in 2015 in comparison to 2014’s 7.4% have emerged and investor sentiment in commodity currency such as the Australian and New Zealand Dollars is tumbling.
Analyst Robin Bhar stated: ‘There is a bit more downside to come. Demand is weak in comparison with the last few years.’
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate advanced early in Monday’s European session ahead of UK Lloyds Employment Confidence figures.
However, doubts about a Bank of England (BoE) interest rate rise could play on the Pound Sterling exchange rate after a string of weak UK data.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate could be in for an interesting week as a stream of influential data is published.
When considering ‘Kiwi’ Dollar movement, it’s important bare in mind factors like Chinese developments, Australian economic strength and dairy prices. The New Zealand Dollar was offered some significant support from all of these factors in the past week, helping it climb against other major currencies.
Concerns of a domestic economic slowdown saw the Chinese government press ahead with plans for 300 infrastructure projects totalling a massive 7 trillion Chinese Yuan (CNY) – a development which could improve New Zealand’s own economic outlook.
Economist Julie Wang stated: ‘It’s part of China’s efforts to stabilise growth, and the news will help boost market confidence.’
However, Chinese inflation only edged up slightly on Friday from 1.4% to 1.5% in December.
According to economist Liu Ligang; ‘Going forward, we do see the risk of deflation is rising, especially [as] PPI inflation has been in negative territory for over 34 months. That means there’s no pass-through effected from PPI inflation into CPI inflation. In fact, CPI will continue to be dragged down by PPI inflation in the next few quarters [and] all this suggests the People’s Bank of China will need to act more aggressively.’
Although some economists have argued that the fast-tracking of building projects could be labelled a stimulus measure, China has argued that the infrastructure builds would not ‘play the role of using fiscal expenditure as strong economic stimulus in 2015’ and that they differed from stimulus invoked in 2008.
Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast
So, looking at the week ahead, Sunday will see the release of Chinese New Yuan Loans and Aggregate Financing figures which could play a small part in New Zealand Dollar exchange rate movement.
Monday will see low-importance Kiwi releases such as the ANZ Truckometer and Roy Morgan Weekly Consumer Confidence reports. Tuesday’s Chinese Trade Balance will detail the amount of imports and exports into the country and could play a larger part in New Zealand Dollar movement.
In November China’s trade surplus advanced to record levels as imports fell by 6.7% instead of advancing the 3.8% anticipated. Exports were up 4.7% on the year. Lower crude oil prices contributed to the result, and the commodity’s downtrend has continued in the mean time.
However, later in Tuesday’s session New Zealand Card Spending and House Prices stats will be published and could prove pivotal for the direction taken by the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate.
Pound movement is also extremely likely with the UK Consumer Price Index due for release. Any rise in inflation could suggest that the Bank of England (BoE) may be more willing to hike rates in the near future amid heightened speculation that we won’t see rate rises by the central bank in 2015 at all.
The rest of the week is relatively quiet in terms of UK and New Zealand data, leaving the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate open to movement from global developments.
On Sunday the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending in the region of 1.9329
