Pound to New Zealand Dollar - GBP NZD Exchange Rate Suffers Sterling Losses, Next Week Forecast Movement

July 31, 2014 - Written by Ben Hughes

STORY LINK Pound to New Zealand Dollar - GBP NZD Exchange Rate Suffers Sterling Losses, Next Week Forecast Movement

This week saw the British Pound to New Zealand Dollar exchange rate slip from a 1.9874 high to finish trading at 1.9762 GBP/NZD.

Early in the week the New Zealand Dollar came under pressure as Fonterra Cooperative Group, the world’s major dairy exporter, trimmed dairy prices. The latest Pound (GBP) to NZD exchange rate stands 0.42% pct lower at 1.97763.

As dairy produce is New Zealand’s most important export the news pushed the ‘Kiwi’ lower against almost all of its main currency counterparts and saw the asset drop below 85 US cents.

Fonterra’s milk price forecast for the period 2014-2015 was slashed from 7 Dollars per Kg of milk solids to 6 Dollars per Kg of milk solids.

Industry expert Theo Spierings accordingly commented; ‘Our forecasting anticipates some recovery in global dairy prices but it is too early to predict how strong this recovery will be or when it will kick in.

As we continue to drive for growth in our consumer and foodservice businesses, during the first half of the current financial year we expect reduced costs of goods arising from lower dairy commodity prices to have a positive impact on returns’.

In the twelve months through May, dairy products accounted for around a third of New Zealand’s total exports, so investors will be hoping for an uptick in dairy prices sooner rather than later.

Building Permits Climb

The appeal of the New Zealand Dollar was little changed following the publication of New Zealand’s Building Permits figures for June.

The data showed that the number of building permits issued in the nation accelerated at the most rapid rate for three months in June.

After building permits fell by an adjusted -4.4% in May they were shown to have advanced by 3.5% in June on a month-on-month basis, encouraging this response from economist Michael Gordon; ‘Not surprisingly, the rise in consents was driven by the Auckland and Canterbury regions, with both reaching new cycle highs. June was also a strong month for non-residential building consents [...] Setting aside its month to month volatility, there has been a strong uptrend in non-residential consents over the last three years, which is now starting to translate through to the actual building work figures.’

Potential RBNZ Intervention Weighs

Another factor keeping the New Zealand Dollar (NZD) trending lower was speculation that last week’s comments from the Reserve Bank of New Zealand regarding the unjustifiable strength of the ‘Kiwi’s exchange rate could act as a precursor to intervention in the currency market. The central bank has previously stated that the New Zealand Dollar is primed for a reversal, but last week’s commentary from RBNZ Governor Graeme Wheeler was particularly damning. He commented that the nation’s exchange rate had ‘yet to adjust to weakening commodity prices’ and that consequently there is the ‘potential for a significant fall’.

During the European session the Pound to New Zealand Dollar exchange rate was little affected by the release of the Lloyds Business Barometer, which pushed from 51 to 52.

Although today’s stream of influential US reports could have a wide reaching influence, in the hours ahead movement in the Pound to New Zealand Dollar pairing (GBP/NZD) is more likely to be inspired by the UK’s GfK Consumer Confidence survey, China’s manufacturing PMI and the UK’s Markit Manufacturing PMI.

While positive figures from China could buoy the commodity-driven New Zealand Dollar (NZD), if the UK’s manufacturing data demonstrates continuing strength in the sector the Pound Sterling (GBP) just might be able to close out the week on a high.

Updated New Zealand Dollar Exchange Rates - Markets Closed 02/08/2014

The Pound to New Zealand Dollar exchange rate is 1.97622 GBP/NZD.
The Euro to New Zealand Dollar exchange rate is 1.57781 EUR/NZD.
The US Dollar to New Zealand Dollar exchange rate is 1.17480 USD/NZD.
The Australian Dollar to New Zealand Dollar exchange rate is 1.09409 AUD/NZD.

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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts