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British Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Lower as NZ Currency Strenthens

July 9, 2014 - Written by David Woodsmith

Last week the New Zealand Dollar (NZD) was struggling against several of its currency counterparts, including the Euro (EUR), Pound (GBP) and US Dollar (USD) exchange rates as unexpectedly upbeat US employment figures and declining dairy prices lessened the appeal of the commodity driven asset.

However, the NZ Dollar did continue to receive underlying support from the expectation that positive domestic fundamentals will encourage the Reserve Bank of New Zealand to continue with its current round of slow and steady interest rate hikes.

This week the commodity-driven asset has advanced to almost record levels against the US Dollar and has maintained a bullish relationship with the Pound Sterling.

Although the Business Opinion Survey compiled by the New Zealand Institute of Economic Research dropped from 52 to 32 in the second quarter, the New Zealand Dollar (NZD) was able to post widespread gains at the beginning of the week.

The commodity driven asset was bolstered as Fitch (a top ratings agency) reaffirmed New Zealand’s AA rating and upwardly revised its outlook for the nation from Stable to Positive.

NZD/USD Surges to Record Levels

After the Fitch upgrade was announced the New Zealand Dollar initially surged by 0.7% against the Pound. The NZD/USD exchange rate also jumped to close to record high levels, advancing to 87.93 US cents. According to currency strategist Raiko Shareef; ‘Fitch was the catalyst for that particular jump higher but overnight there was a general uptrend for both ‘Aussie’ and ‘Kiwi’ and a whole bunch of emerging market currencies – the big theme at play still is one where the carry trade reigns supreme. It peaked its head above 88 cents – it’s still a struggle for the Kiwi to break that level in any significant fashion, it keeps on testing it.’

Similarly, industry expert Annette Beacher noted; ‘This is a clear positive for the NZD in both the near and medium-term. A shift to a positive outlook does not necessarily guarantee a credit upgrade to AA+, but the odds have shifted decisively in that favour.’ The weakness in the Pound to New Zealand Dollar exchange rate was also partially caused by ongoing concerns following the UK’s less-than-impressive Manufacturing and Industrial Production reports.

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New Zealand Card Spending data was published during the Australasian session, and though it was a little soft it had only a very modest impact on the New Zealand Dollar exchange rate.

The report showed that Core Retail Spending was down 0.4% in June, and that Retail Spending stagnated instead of rising by 0.2% (as economists had predicted).

Card Spending was shown to have increased by 0.5 on the month. Given that New Zealand recorded a post-Easter rebound in sales in May, this result was something of a disappointment.

As stated by Business Indicators Manager Neil Kelly; ‘Spending rose in three retail industries and fell in three during June’.

Pound Sterling to NZ Dollar Forecast - UK Fundamentals Disappoint

On Wednesday the Pound to New Zealand Dollar exchange rate was trading in the region of 1.9449, having pared previous losses to a decline of 0.2%.

With the Bank of England’s rate decision looming, every UK report is important and today data revealed that UK house prices fell by more-than-expected on a month-on-month basis in June.

House prices were down by -0.6% following a positively revised monthly increase of 4.0% in June. A decline of -0.3% had been expected. The British Retail Consortium’s Shop Price Index also registered an annual drop of -1.8% in June, the steepest year-on-year decline for 16 months.

The Federal Open Market Committee meeting minutes are still to be published later today and could prove to be the catalyst for extensive market volatility if they are surprisingly hawkish or dovish in tone.

New Zealand Dollar (NZD) Exchange Rates - Revised 11th July 2014



The Pound to New Zealand Dollar exchange rate is trading down -0.08% at 1.94274 GBP/NZD.
The Euro to New Zealand Dollar exchange rate is trading down -0.1% at 1.54266 EUR/NZD.
The US Dollar to New Zealand Dollar exchange rate is trading down -0.15% at 1.13329 USD/NZD.
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