Sterling Forecast: Pound to Rand & NZ Dollar Exchange Rates To Dip On Risk Appetite

May 28, 2014 - Written by Tim Boyer

STORY LINK Sterling Forecast: Pound to Rand & NZ Dollar Exchange Rates To Dip On Risk Appetite

Sunday night’s disappointing New Zealand trade balance data have held back the Kiwi Dollar during yesterday’s session, sending the Pound New Zealand Dollar exchange rate up to as high as 1.9726 GBP/NZD on the day.

The Pound Sterling to South African Rand exchange rate is trading up 0.12% at 17.59204 GBP/ZAR and the Pound Sterling to New Zealand Dollar exchange rate is trading up 0.3% at 1.96797 GBP/NZD.

However, the main event for this week’s session, as far as Kiwi-watchers are concerned, was still to come in the form of today’s announcement from Fonterra Cooperative Group’s milk price forecast. Agricultural economists are anticipating that the price fix will see New Zealand’s dairy farmers receive a lower level of recompense for their produce. With the Kiwi economy still heavily weighted toward farming, such an outcome could see the NZD lose further ground against the Pound, sending the GBP/NZD exchange rate back up towards the two to one threshold once more.

Elsewhere, yesterday’s session saw global equities post strong gains, with London’s FTSE 100 and Frankfurt’s DAX both recording increases of close to 0.50%; Chicago’s broad-based S&P 500 posted a similar gain. The generalised uptick in global appetite for risk was partly driven by a clear-cut victory for Petro Poroshenko in Ukraine’s presidential election. Russian President Vladimir Putin has suggested in recent days that Poroshenko could be someone that he could work with and the global markets perked up at the prospect of a peaceable end to the Kiev / Moscow standoff which has at times over the past two months looked liked spilling into a civil war. If Poroshenko is able to bring together opposing factions in the Eastern and Western parts of his nation, then several eurozone states dependent on continued supplies of Russian gas for their energy needs will also be breathing a heavy sigh of relief. Look for the euro (currency:EUR) to be well-supported in such a circumstance.

The improvement in investor sentiment during early trading this week is likely to favour the New Zealand Dollar, cancelling out the negative effect of any potential drop in Kiwi dairy prices. Similarly, a continued strong performance from global shares could help the South African Rand (currency:ZAR) claw back some of the losses which it incurred against the Pound yesterday following the publication of a poor set of domestic Q1 GDP data.

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