Sterling (GBP) Capitalises as New Zealand Dollar (NZD) Flags with Unexpected Depreciation from China to Bolster GBP/NZD Exchange Rate
Struggles for the ‘Kiwi’ (NZD) continue today as the currency is dragged down, along with the rest of the Australasian currencies, by the People’s Bank of China (PBOC) choosing to significantly depreciate the value of the Yuan (CHY). The GBP/NZD exchange rate pairing was quick to benefit from this softening, shooting up to 2.3796 and continuing to trend strongly upwards this morning.
Commodity concerns have pushed the New Zealand Dollar (NZD) down in value today as Sterling (GBP) strives to make up for the decreased probability of an imminent UK interest rate rise.
Pound Weaker after Bank of England Reports Benefitted New Zealand Dollar, GBP/NZD Exchange Rate Forced to Retreat from Five-Year High
Things had started strongly for the GBP/NZD exchange rate last week, as the ‘Kiwi’ (NZD) faced a buffeting as the result of unimpressive unemployment figures and a bad outcome from the GlobalDairyTrade auction, which had seen prices fall for the tenth consecutive month. While the Unemployment Rate was as-expected the Employment Change came in lower than forecast, further supporting the conclusion that the New Zealand economy is continuing to struggle as a result of the global slowdown.
After hitting a fresh monthly peak of 2.3989 on Wednesday, however, the GBP/NZD pairing rapidly slumped as the Bank of England (BoE) data releases suggested that an interest rate rise is incredibly unlikely before the end of the year. The dovish tone traders took away from the Monetary Policy Committee (MPC) meeting minutes was immediately reflected in the value of the Pound (GBP) as the currency dived across the board, with the GBP/NZD exchange rate falling to 2.3673 and continuing to trend lower throughout the following days.
Financial Support for New Zealand Dairy Farmers Shored up ‘Kiwi’ (NZD) to Maintain GBP/NZD Exchange Rate Decline
Weak figures from China over the weekend weighed on the market as a whole, as the Imports, Exports and PPI results all came in lower than anticipated. This certainly seems to indicate that the current stagnation in commodity values is likely to continue into the near future.
Consolation for dairy farmers, however, was ushered in by an announcement that Fonterra, the largest producer of milk products in New Zealand, will be providing an interest-free loan to struggling co-op members, with a value of 50 cents extra for every kilogram of milk solids. With its potential to prop up the struggling domestic industry this is likely to lend further strength to the ‘Kiwi’, having driven the GBP/NZD pairing back to 2.3408 this morning, although the gain proved ultimately only short-lived.
Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: UK Employment Figures and New Zealand PMI Stand to Move Pairing
Employment data for the UK will be published on Wednesday, with the Employment Change and Unemployment Rate offering a possible chance at a rally for the Pound. Should positive figures dispel the continuing dovishness of the currency that has held over from last week’s BoE Rate Decision and MPC meeting minutes, the GBP/NZD exchange rate could well be boosted back towards its earlier highs.
New Zealand’s Manufacturing PMI, however, might cause an upset and produce a better-than-expected result. Although a lot of the value of the ‘Kiwi’ remains strongly tied to the fortunes of the nation’s dairy trade this could still give the currency enough strength to send the GBP/NZD pairing trending downwards once more.
Current GBP, NZD Exchange Rates
At time of writing the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was moving up in the range of 2.3588, with the New Zealand Dollar to Pound Sterling (NZD/GBP) pairing at 0.4238.