Pound to NZ Dollar: GBP/NZD Relatively Static after UK Data and Dairy Price Declines

Modified: Thursday, 4 June 2015 15:14 BST - Written by James Fuller

STORY LINK Pound to NZ Dollar: GBP/NZD Relatively Static after UK Data and Dairy Price Declines

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Fluctuates as Both Pound and NZ Dollar Register Losses

The Pound remained in a narrow range against the New Zealand Dollar on Wednesday after UK data disappointed investors. The latest service sector PMI fell from 59.5 to 56.5 in May, rather than the 59.2 economists had expected.

The report read: ‘The UK service sector continued to register strong expansion in May, according to the latest PMI survey data from Markit and CIPS. The rates of growth in both total business activity and new work slowed to the weakest in 2015 so far, but nevertheless remained sharp overall and stronger than the long-run survey averages.’

UK Service Sector Growth Falls Short, Pound Pressured

The disappointment extended into bets for potential interest rate increases as the service sector is the largest driver of UK economic growth. Investors have been watching data carefully in an attempt to judge when the Bank of England will be ready to increase borrowing costs after many months of back and forth from the central bank. Previously, the Pound exchange rate has rallied when it’s been widely speculated that the BoE may begin to hike rates. Thursday will see the central bank announce its latest interest rate decision and although no adjustment to monetary policy is forecast, the minutes released later in the month will be of interest to many investors as it may show a divergence of policymakers on the topic of higher borrowing costs.

If a divergence were to occur, the Pound could rally against other majors as it appears that the UK could soon see higher borrowing costs. Meanwhile, investors are anxious regarding next week’s Reserve Bank of New Zealand interest rate decision.

Will the RBNZ Cut Rates?

After becoming fairly dovish in recent months, it’s possible the central bank may opt to reduce borrowing costs to encourage economic growth. There’s been a serious lack of NZ domestic data out this week leaving the ‘Kiwi’ exchange rate to fluctuate on account of global developments. However, Monday saw the New Zealand Terms of Trade Index come in at only 1.5% in the first quarter on a Q-o-Q basis. Meanwhile, the latest New Zealand Commodity Price figure came in at -4.7% in May after the previous month’s -7.4% contraction.


Another factor weighing on the ‘Kiwi’ at the moment is dairy prices which have fallen by around 50% in the past year. The latest dairy auction failed to boost confidence when the sixth consecutive drop in prices occurred.

Industry expert Susan Kilsby stated: ‘It was surprising to see such weak results for the milkfat products, because in the US and European markers there is steady support for butter.’

New Zealand Value of All Buildings data will be out later on Wednesday.

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TAGS: Daily Currency Updates New Zealand Dollar Forecasts Pound Forecasts