NZ Dollar Forecast: GBP/NZD Exchange Rate Bullish after BoE Minutes and Interest Rate Outlook

November 19, 2014 - Written by Ben Hughes

STORY LINK NZ Dollar Forecast: GBP/NZD Exchange Rate Bullish after BoE Minutes and Interest Rate Outlook

The Pound Sterling (currency:GBP) gained against the New Zealand Dollar (currency:NZD) after the Bank of England (BoE) released its meeting minutes.

Bank of England Governor Mark Carney continued to remain in the ‘against’ camp while Ian McCafferty and Martin Weale led the way as hawks.

The minutes commented on the recent revisions to inflation forecasts, which indicated that the UK Consumer Price Index could dip below 1% temporarily in the coming months.

The Pound to New Zealand Dollar exchange rate converts +0.88 per cent higher at 1 GBP is 1.99429 NZD.
The Euro to New Zealand Dollar exchange rate today is converting +0.66 per cent higher at 1.59569 EUR/NZD.
The US Dollar to NZ Dollar exchange rate is +0.6 pct higher with a conversion rate of 1 USD equals 1.27255 NZD.
The NZ Dollar to Aus Dollar conversion rate is +0.52 pct higher at 0.91240 NZD/AUD.

BoE Minutes Show Division on Interest Rates and Inflation

The minutes showed some division in inflation forecasts—a subject that could cause issues for the Pound exchange rate in the future.

The minutes stated: ‘There was a risk that growth might soften further than anticipated.’ This is a fact Governor Carney discussed recently in a press conference. The minutes continued that if the central bank were to increase the bank rate it ‘would leave the economy vulnerable to shocks.’

Again, this is a fact many have heard before from the BoE. However the minutes added an interesting twist when the report stated: ‘Against this, however there was also a risk that the degree of spare capacity would be eliminated more quickly than assumed, [which would] potentially result in inflation rising to, and subsequently overshooting the 2% target.’ The latter statement is a relatively new view after Carney’s recent press conference in which he painted a fairly negative outlook for the UK economic recovery. It is worth noting Carney also stated at the conference that the UK would struggle with inflation for the next three years.

New Zealand Dollar (NZD) Exchange Rate Softer following Dairy Price Cuts

Meanwhile, the NZD has been trending lower following further dairy price cuts.

The New Zealand Dollar softened as the latest dairy auction proved fruitless for dairy farmers who were hoping for some price stability in the near future.

The last few auctions appeared to show prices were stabilising after dropping by almost 50% this year but prices are now dwelling at a five-year low. Federated Farmers Dairy Chairman Andrew Hoggard commented: ‘It goes without saying that the lowest auction price in five years is going to be a blow to the industry.’

In the coming days, events to look out for will be Chinese Manufacturing PMI on Thursday (as New Zealand’s largest trading partner any favourable Chinese data offers the ‘Kiwi’ support), UK Retail Sales also on Thursday and New Zealand Credit Card Spending on Friday. Any speeches by Bank of England officials in the remainder of the week will also have an impact on the GBP/NZD currency pair.

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