Pound NZ Dollar (GBP/NZD) Exchange Rate Climbs by 0.20pct Before BoE Rate Decision

June 4, 2014 - Written by Minesh Chaudhari

STORY LINK Pound NZ Dollar (GBP/NZD) Exchange Rate Climbs by 0.20pct Before BoE Rate Decision

GBP/NZD Exchange Rate Climbs by 0.20% before BoE Rate Decision - New Zealand Dollar (NZD) Softens Despite Pound Sterling (GBP) Weakness - Yesterday the Pound Sterling came under pressure as the UK’s construction PMI report came in slightly below forecast levels. While Sterling losses were limited by a separate report detailing a 0.7 per cent surge in UK house prices, the Pound still closed European trading in a softer position against peers like the US and New Zealand Dollars.

The Pound Sterling to New Zealand Dollar exchange rate is trading up +0.27% at 1.98999 GBP/NZD.

However, an additional decline in the price of dairy produce (New Zealand’s main export) saw the Pound recover losses against the ‘Kiwi’ during the Australasian session.

Falling dairy prices have been a concern in recent weeks and at the latest GlobalDairyTrade auction the price of milk powder slumped by 8.5 per cent.

GlobalDairyTrade’s index shed 4.2 per cent.

As a result of this the New Zealand Dollar dropped to a low of 1.9961 against the Pound and edged lower against the US Dollar for a third day.

The NZD/AUD exchange rate slumped to a six-month low.

The New Zealand Dollar’s poor performance against its neighbouring rival was also the result of Australia’s impressive first quarter growth figures.

The Australian Bureau of Statistics revealed that the Australian economy grew by 1.1 per cent in the first three months of 2014. Iron ore exports helped bolster growth and house building in the larger South Pacific nation surged.

Of course the Australian Dollar (AUD) was also trending higher as a result of yesterday’s Reserve Bank of Australia rate decision, at which the key rate was left unchanged at 2.5 per cent.

The Pound to New Zealand Dollar exchange rate (GBP/NZD) posted an initial gain of 0.35 per cent, though this has since moderated to 0.25 per cent.

New Zealand’s Reports Have Little Impact

The publication of two low-volatility domestic reports caused no notable movement in the ‘Kiwi’ during Australasian trading.

Firstly, the nation’s value of all buildings report showed a quarterly rise of 16.0 per cent – smashing expectations for a rally of 5.5 per cent.

A 2.2 per cent decline in New Zealand’s commodity prices were revealed in a separate report.

The figure now stands almost 6 per cent lower than it did in February. While dairy prices softened, aluminium and forestry prices also declined.

Rate Hike Bets Ease

A major cause of the New Zealand Dollar’s current bout of weakness is that investors believe that the Reserve Bank of New Zealand may reconsider its current interest rate hiking cycle.

In the view of industry expert Peter Cavanaugh; ‘The New Zealand Dollar has come off the boil. The markets are digesting comments from the Reserve Bank and even though they expect them to raise the cash rate next week, they will probably tone down the rhetoric and slow down the path for rate rises. The market in March was confidently predicting a rate rise in July and now you would have to say that’s much less likely.’

BoE Rate Decision on Tap

As China is one of New Zealand’s major trading partners the nation’s services and composite PMI for May could have an impact on the ‘Kiwi’ during Australasian trading.

The composite index provided a reading of 49.5 in April, just shy of the 50 mark separating contraction and growth.

The services measure came in at 51.4, so economists will be hoping for another strong result.

Australia’s trade balance report will also be of interest to the New Zealand Dollar exchange rate, as will Thursday’s domestic house price report.

However, investors with an interest in the Pound to NZ Dollar exchange rate (GBP/NZD) pairing will be focusing on the Bank of England’s rate decision, taking place tomorrow at 12:00 GMT.

The BoE is expected to leave interest rates on hold and the rate of asset purchases unaltered. However, any unforeseen developments could have wide ranging repercussions.

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