Pound to New Zealand Dollar: Today's GBP/NZD Rises as ?Kiwi? Sentiment Dampens on Dairy Prospects

March 11, 2015 - Written by Frank Davies

STORY LINK Pound to New Zealand Dollar: Today's GBP/NZD Rises as ?Kiwi? Sentiment Dampens on Dairy Prospects

The Pound climbed against the New Zealand Dollar on Wednesday after several influential data releases and ahead of central bank decisions. The New Zealand Dollar took a beating this week on account of several factors, including fears over New Zealand’s largest export, dairy.

Back in November, dairy giant Fonterra was sent a letter with samples of poisoned baby formula and the demand for a pesticide to be removed from farming in the antipodean nation by the end of March. The opposition came from activists who felt strongly about the use of the pesticide which was killing possums and stoats. Industry expert Scott Gallacher commented: ‘We are confident that New Zealand infant and other formula is just as safe today as it was before this threat was made. People should keep using it as they always have. This criminal threat is designed to cause fear in order to generate a political outcome. It is using food as a vehicle, but should not undermine confidence in our world-class food safety system or any manufacturer.’

Next up was weaker than expected Chinese data; as China is New Zealand’s largest trading partner, any developments within the nation can impact the ‘Kiwi’ quite substantially. China’s Retail Sales slipped from 12.0% in the annual year to date to 10.7%; economists had expected a softer drop to 11.6%. Industrial Production also took a tumble from 8.3% to 6.8% in the same time period. In addition, New Zealand noted a decline in demand from China for milk products. China buys a total of $3.11 billion milk products per year and any dent in New Zealand’s exports could damage the ‘Kiwi’ dramatically.

Another factor weighing on the ‘Kiwi’ is the upcoming Reserve Bank of New Zealand interest rate decision, which is expected to see the benchmark rate remain at 3.50%. However, the central bank recently took on a more dovish tone and industry experts feel amid a global slowdown the central bank may have to adjust monetary policy at some point.

Conversely, the Pound has been buoyant as investors’ price in Bank of England rate hikes in the near future. Wednesday was a little disappointing for the UK economy when UK Manufacturing Production took a tumble from 2.6% to 1.9%. The stat came as a surprise after economists had suggested the figure would record growth. UK Industrial Production rose in line with estimates, climbing from a positively revised 0.8% to 1.3%.

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TAGS: Pound New Zealand Dollar Forecasts