Pound Sterling Forecast Positive, NZD Outlook Improves on GlobalDairyTrade Results

May 17, 2016 - Written by John Cameron

STORY LINK Pound Sterling Forecast Positive, NZD Outlook Improves on GlobalDairyTrade Results

The Pound has rallied across the board today, due to the chances of an 'In' vote rising considerably on recent polling stats.

GBP/NZD Exchange Rate Advances on Downbeat Dairy Futures

Expectations were muted for this afternoon’s GlobalDairyTrade auction results. Analysts forecast that, after three strong results on the trot, the fortnightly online sale results might point to a more muted demand for dairy products. Auckland-based OMF – a leading dairy analyst – made the below prediction earlier today –

‘Premiums in whole milk futures versus GDT are quite small, better for skim milk and overall it's been pretty quiet and a bit mixed in the market so it's been quite hard to predict over the last few GDTs based on where the futures are but that's how it looks at the moment, so we think a rise for skim, flat for whole milk and probably flat overall for the index.’

These downbeat industry expectations supressed support for the New Zealand Dollar (currency : NZD) thanks to the Kiwi economy’s continuing dependence on the export of dairy products, and in particular for Whole Milk Powder (WMP). The Pound Sterling New Zealand Dollar exchange rate tracked higher to touch 2.1318 GBP NZD during the early part of the European trading session in response.

However, holders of the Kiwi Dollar needn’t have worried. The auction results pointed to a hefty 2.6% increase in the overall hammer price, with the WMP price increasing for the fourth month on the trot, this time by a significant 3.0%. The New Zealand unit staged a concerted comeback as a result, sending the GBP NZD exchange rate down to an intraday low of 2.1156 as a consequence.

Disappointing UK Inflation Data Dampens Sterling Sentiment

Elsewhere, there was further bad news for holders of the Pound Sterling (GBP) earlier today, when April’s UK Consumer Price Index data, out this morning, unexpectedly dropped from the previous month’s year-on-year result of 0.5%.

The fall to an annualised 0.3% lead the widely-respected EY Item Club to observe that, ‘we are likely to see inflation remain close to current rates until the latter part of the year, when the base effects associated with last winter's collapse in the oil price will begin to kick in and finally drag the CPI measure above 1%.’

If this forecast is correct, then the Pound Sterling could have some tough times ahead.

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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts Poun Forecasts