British Pound to New Zealand Dollar (GBP/NZD) Lowers Along With Euro (EUR), Dollar (USD) and Aus Dollar (AUD)

August 20, 2014 - Written by John Cameron

STORY LINK British Pound to New Zealand Dollar (GBP/NZD) Lowers Along With Euro (EUR), Dollar (USD) and Aus Dollar (AUD)

The Pound to New Zealand Dollar exchange rate (GBP/NZD) tis trading lower again lower today after Sterling was hit by widespread losses against all the majors yesterday.

The Sterling saw negative movement against the Euro, US Dollar, Canadian Dollar, Australian Dollar and South African Rand on Thursday.

Here's what Friday's forex market NZD levels look like:

- The New Zealand Dollar to Euro exchange rate is trading up +0.26% at 0.63400 NZD/EUR.
- The New Zealand Dollar to Pound Sterling exchange rate is trading up +0.24% at 0.50769 NZD/GBP.
- The US Dollar to New Zealand Dollar exchange rate is trading down -0.22% at 1.18840 USD/NZD.
- The Canadian Dollar to New Zealand Dollar exchange rate is trading down -0.26% at 1.08522 CAD/NZD.
- The Hong Kong Dollar to New Zealand Dollar exchange rate is trading down -0.21% at 0.15334 HKD/NZD.
- The Australian Dollar to New Zealand Dollar exchange rate is trading down -0.08% at 1.10684 AUD/NZD.

The New Zealand Dollar is likely to remain low across the board as dairy prices have been cut far lower than anticipated of late; causing the expectation for any increase in interest rates in New Zealand to become subdued. The Pound however has seen a shining day of positivity today with economists’ forecasting the possibility of further rising and stronger exchange rates for Sterling following the first non-unanimous vote since 2011 for the Bank rate to rise.

New Zealand Economy Struck by Falling Dairy Prices Dashing Hopes of Interest Rate Hikes

The New Zealand Dollar has become weakened as lower growth and inflation predictions pull the New Zealand economy back. Furthermore with the recent hit of dairy prices tumbling, the New Zealand economy looks as if it may be far less fruitful in the near future than hoped. Yesterday saw the Reserve Bank of New Zealand (RBNZ) slash its Two Year Inflation Expectation from the former 2.36% to the revised 2.23%. Expert in the field Peter Cavanaugh stated: ‘If we get more of the same, “Kiwi” in its fragile state could fall further. On the other hand, the New Zealand Dollar remains underpinned by the yield that it offers the world.’ The Reserve Bank of New Zealand has raised the Official Cash Rate (OCR) four times consecutively this year, and now attentions will be turned to the next Monetary Policy Statement scheduled for September the 11th. Cavanaugh continued: ‘The pace of their OCR rises was probably not merited. They are going to be slower to neutral than expected.’

Dairy prices could play a major part in influencing the New Zealand Dollar to trade lower, with prices appearing to fall frequently of late. Forex expert Kymberly Martin stated: ‘The latest GlobalDairyTrade auction also took place early this morning and appeared to inspire some New Zealand Dollar volatility. The 0.6% fall in average dairy prices was actually rather stable following recent sharp declines. However, the 41% decline in prices since February suggests a drag on economic activity over the coming 18 months.’

Forecast - Pound Sterling Set to Rally Against Other Majors?

The Pound has gained today in the currency market against other majors, following the publication of the latest Bank of England meeting minutes. The question circulating the currency market for some time has been: When will the UK see interest rate hikes? The Bank of England has proven to be conflicting of late in their views towards rate hikes, leaving many facing confusion. However this week has shed some light on the Pound’s trajectory, with the Governor for the Bank of England, Mark Carney suggesting that interest rates may not be so out of reach for the UK economy.

Barclays however are placing large amounts of faith in the Pound stating that they believe it could test six year highs against the US Dollar (USD). Barclays suggested: ‘There’s no reason why we can’t see a retest of the multi-year highs given the fact that we expect the Bank of England to [raise] rates earlier.’

The Pound continues to trade strongly in the currency market, giving hope to the UK economy that interest rate hikes could appear in the near future. The New Zealand Dollar however may remain low for some time now the prospect of further interest rate hikes appear dashed.

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