Chinese Inflation Data Forecast to Assist GBP AUD and GBP NZD Exchange Rates

December 9, 2015 - Written by John Cameron

STORY LINK Chinese Inflation Data Forecast to Assist GBP AUD and GBP NZD Exchange Rates

Rising Chinese Inflation Supports Hope that Chinese Policy Makers will Avoid Additional Near-Term Stimulus

One big data release has already taken place this morning in the form of the latest Chinese Consumer Price Index inflation data.

The November figure was expected by analysts to show that domestic prices in the world’s second largest economy were rising at a year-on-year 1.4% last month – up from October’s counterpart figure of 1.3%.

The result of 1.5% therefore suggested that Chinese policy makers may now refrain from further monetary policy stimulus, in the near-term, at least.

The People’s Bank of China has announced successive cuts in its key lending rate during recent months and has, at the same time, lowered the capital ratio it requires local retail banks to maintain.

The net effect of this ‘easier money’ policy was to boost exports into China from Australia and New Zealand – both Antipodean nations share China as their number one export destination.

The news of higher levels of price rises in China overnight and the attendant suspicion that the People’s Bank of China will now stall its policy loosening have held back the Australian Dollar (currency : AUD) and New Zealand Dollar (currency : NZD) during early trading in Europe.

GBP to AUD Exchange Rate Back above 2.09 Today

The Pound Sterling Australian Dollar exchange rate touched 2.0906 GBP AUD a short time ago, while the Pound Sterling New Zealand Dollar exchange rate has already climbed back above the 2.0700 GBP NZD threshold during early trade today.

Further movement is anticipated for the GBP NZD exchange rate as tonight’s Reserve Bank of New Zealand’s latest monetary policy announce, due at 2000hrs GMT tonight, approaches.

GBP to NZD Exchange Rate Forecast to Rally as RBNZ Expected to Cut Rates

A rate cut of 25 basis points is widely anticipated, however Kirdan Lees of the New Zealand institute of Economic Research explained yesterday that the RBNZ’s decision is far from clear-cut.

He noted that, ‘the Reserve Bank is in a bind - leave rates on hold and miss the inflation target, or lower them but risk an asset-price spiral,’ before going on to state that, ‘increasingly, inflation targeting is no longer fit for purpose.’ Analysts forecast that a ‘hold’ decision from RBNZ would send the GBP NZD exchange rate plummeting.

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