The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate seems uninspired this week as EU referendum concerns flood UK headlines amidst surprising ‘Kiwi’ growth.
Pound (GBP) Unable to Settle Due to Continued ‘Brexit’ Anxieties
The Pound was unable to maintain an uptrend against the ‘Kiwi’ that began earlier this week as general Sterling sentiment continued to remain apathetic. This allowed the Pound to be carried along by the whimsical movements of the risky New Zealand Dollar (NZD). The pair is currently down -0.4%, slightly lower than this morning’s opening levels of 2.1066 and trending around 2.0974.
Sterling’s current weakness is commonly attributed by analysts as being a result of general Pound apathy and anxiety from current ‘Brexit’ discussions – brought once again to the centre stage of UK news through sentiments from International Monetary Fund (IMD) Chief Christine Lagarde, who claimed that IMF’s findings proved that a successful exit from the EU would hurt both ‘the UK and EU’.
This sentiment is reflected by the Bank of England (BoE) Governor Mark Carney’s remarks that a successful vote to leave would cause the ‘biggest domestic risk to financial stability’.
This anxiety among investors for the EU referendum event in June – still three months away – was enough to offset even positive Production data released for UK this morning. Year-on-year Manufacturing Production in particular has calmed to -0.1% from last month’s annual figure of -1.7%. This more-optimistic data compared to forecasts of -0.7% was unfortunately not enough to breathe new life into Sterling as it continues to fall against the ‘Kiwi’.
New Zealand Dollar (NZD) Exchange Rate Stands Ground Despite Reserve Bank and China Concerns
The New Zealand Dollar was able to stand firm against the sluggish Pound despite a lengthy list of concerns plaguing the ‘Kiwi’ since Monday. The Reserve Bank of New Zealand (RBNZ) is expected to comment on the future of NZ interest rates this afternoon, causing a lack of strongly influential currency movements as investors remain wary for the time being.
The risky NZD was also expected to suffer considerably from the shockingly poor export data released by China yesterday. The ‘Kiwi’ commodity currency benefits greatly from trade with China – whose trade balance dropped in February by almost half to 209.50b from its January balance of 406.20b.
However, despite many investors leaving the commodity currency for safe-haven currencies like the US Dollar (USD) and predictions towards this trend continuing, the New Zealand Dollar has managed to remain firm among investor favour.
This is suspected to be due to impressive damage-control from China in regards to their negative data. The People’s Bank of China (PBoC) is speculated to be using stealth measures to shore up on currency reserves in order to stabilise the domestic economy.
The assets of China’s sovereign wealth fund, China Investment Corp (CIC), are not included in foreign-exchange reserve data according to the State Administration of Foreign Exchange (SAFE). SAFE was reported by Bloomberg as saying that China’s reserves are ‘ample’, potentially renewing confidence in China as the world’s largest foreign exchange stockpile.
Reserve Bank of New Zealand (RBNZ) Announcement Expected to Influence NZD Movement
Later today the Reserve Bank of New Zealand is due to make an announcement concerning the national interest rate. The bank is currently expected to leave the rate at a healthy 2.50%, which could well inspire continued growth from the ‘Kiwi’.
However, many analysts anticipate that the RBNZ will imply that a rate cut will be put into place sometime later this year – an event that economists are already considering to be inevitable.
Any such announcement from the central bank is likely to mute the New Zealand Dollar’s growth and inspire dovish behaviour in investors.
The Pound is likely to continue to be swayed by the movement of its currency rivals as positive UK data releases this morning fail to result in gains against the NZD. Low interest in the currency due to ongoing ‘Brexit’ discussions seem unlikely to change, likely worsening as June’s EU referendum vote draws closer.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending in the region of 2.0974 while the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate trends in the region of 0.4766.
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