Pound Falls Versus New Zealand Dollar (GBP/NZD) as Oceanic Sentiment Rebounds

February 25, 2015 - Written by David Woodsmith

STORY LINK Pound Falls Versus New Zealand Dollar (GBP/NZD) as Oceanic Sentiment Rebounds

The Pound slipped against the New Zealand Dollar on Wednesday after good news swept the Tasman. Firstly, US central bankers were dovish in recent statements causing riskier currencies such as the ‘Kiwi’ to rally. Strategist Mitul Kotecha commented: ‘While it is clear that the Fed still seems geared towards hiking rates, possibly mid-year, I think Yellen didn’t give a particularly concrete assessment of that.’ However, the timeline of Federal Reserve rate hikes has become increasingly blurry with many economists expecting hikes much later than initially suggested. Economist Daisuke Karakama: ‘Yellen’s latest statements were taken as dovish more or less. But the removal of the word ‘patient’ at the March meeting now looks certain, and that would provide an opportunity to buy the Dollar again.’

In addition, the New Zealand Dollar was supported by favourable Chinese data on Wednesday. China’s Manufacturing Purchasing Managers Index (PMI) rose into growth territory at 50.1 in February from 49.7. Industry expert Hongbin Qu stated: ‘Domestic demand firmed while new export orders contracted for the first time since April 2014. Both input and output prices remain in contraction. Today’s data point to a marginal improvement in the Chinese manufacturing sector going into the Chinese New Year period in February. However, domestic economic activity is likely to remain sluggish and external demand looks uncertain. We believe more policy easing is still warranted at the current stage to support growth.’

Meanwhile, the Pound remained buoyant as Bank of England Governor Mark Carney spoke on Tuesday. The central banker retained a hawkish edge while sticking closely to the most recent minutes. The chief also reiterated that he believed inflation was only temporarily low as a result of plunging oil prices. Carney stated: ‘The MPC will conduct policy in order to bring inflation back to target, probably within two years, and that should inform people, particularly as they are forming judgements about appropriate wages.’

Wednesday also saw UK BBA Loans for House Purchase rise past expectations to 36,394. Economist Richard Woolhouse stated: ‘The housing market appears to be bottoming out with a slight increase in approvals for new purchases in the last month but this is still significantly down on the levels of activity we saw last year.’ Thursday’s likely to be a more influential day for the Pound with the release of UK Gross Domestic Product stats. In addition, any further central bank comments could influence the currencies.

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