GBP NZ Dollar Exchange Rate Down as New Zealand Dollar Rebounds

June 6, 2014 - Written by Tim Boyer

STORY LINK GBP NZ Dollar Exchange Rate Down as New Zealand Dollar Rebounds

The Pound to New Zealand Dollar exchange rate (GBP/NZD) pairing was 0.41 per cent lower during European trading on Friday. Domestic factors (and in particular the decline in the price of dairy products) have restrained the New Zealand Dollar over the last week, but the commodity-driven currency staged an impressive rebound on Thursday as investors took a proactive response to the ECB’s decision to implement a wide range of additional stimulus measures. The ECB announcement saw appetite for higher-risk currencies like the ‘Kiwi’ spike and the GBP/NZD pairing slumped as a result. The New Zealand Dollar also advanced on the US Dollar, Euro and Yen. According to senior advisor Stuart Ive; ‘The big story overnight is the ECB. This immediately makes fund managers in Europe start looking for yield somewhere. What is probably doubly attractive for the Kiwi and Aussie in this case is that because of the declines in the currencies of late, it has made them even more attractive. New Zealand is still very much on a rate hiking bias and these funds have to park money. New Zealand is a golden choice.’

New Zealand House Prices Climb at Slower Pace

The New Zealand Dollar continued trading higher against its rivals throughout the local session. During Australasian trading a report showed that house prices in New Zealand were up by 8.2 per cent in May, year-on-year, following an 8.4 per cent annual increase in April. The ‘Kiwi’ was little affected by the news.

NZ Dollar Drop Not Forecast

While the New Zealand Dollar swelled in towards the beginning of the year as the Reserve Bank of New Zealand became the first developed-nation central bank to introduce an interest rate increase, failing dairy prices have since dragged the ‘Kiwi’ lower against several of its major currency counterparts. Earlier this week the New Zealand Dollar posted significant declines as the price of whole milk powder (New Zealand’s main export) plummeted by 8.5 per cent at the latest GlobalDairyTrade auction. However, the ‘Kiwi’ is still high by historical standards and some industry experts are forecasting that the strength in the asset could persist. In the view of HSBC economist Paul Bloxham a moderating in the New Zealand Dollar’s exchange rate would actually be welcome, in that it would benefit the domestic economic outlook. Bloxham stated; ‘You can think of it as a good sign and I’m sure the Reserve Bank will be somewhat comforted by the fall because the currency had [...] been high in the face of falling dairy prices. Even though it’s been down a bit recently, we’re still of the view dairy prices will stay at very high levels and that’s going to maintain a high New Zealand Dollar.’

However, senior market strategist Kymberly Martin was of a slightly different opinion. She observed; ‘The decline in dairy prices is the most visual aspect of what we think will be a broader decline in New Zealand commodity prices across the board. Obviously we’re starting from very elevated levels – New Zealand’s terms of trade are at a 40-year high, so we’re certainly not talking about a collapse.’

Today’s US non-farm payrolls report could have an impact on the New Zealand Dollar exchange rate. A surprise to the downside could benefit the ‘Kiwi’ whereas a surprise to the upside could see it trim gains.

NZ Data due out Next Week...

Next week the most influential economic reports for New Zealand include the nation’s house price index, business performance of manufacturing index, manufacturing activity measure, card spending figures and food price data. The Reserve Bank of New Zealand’s interest rate decision will be of the most interest. The central bank isn’t forecast to increase interest rates at this meeting. Recently RBNZ Governor Graeme Wheeler intimated that the New Zealand Dollar would only lose strength if dairy prices continued to fall, China’s growth slowed more significantly, the US economy showed rapid improvement or volatility in the financial markets increases notably. So far only the first of these considerations has occurred.

The New Zealand Dollar to Pound Exchange Rate is currently in the region of 0.5065. The Pound to New Zealand Dollar Exchange Rate is currently in the region of 1.9720. The US Dollar to New Zealand Dollar Exchange Rate is currently in the region of 1.1759.

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