GBP to NZD Exchange Rate Holds Low in Anticipation of BoE Interest Rate Decision
In spite of a better-than-forecast UK Services PMI on Wednesday the Pound is still struggling to shrug off trader anxiety over the bid for Scottish independence. Meanwhile the New Zealand Dollar is still hurting from yet another fall in dairy prices.
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Initially Tuesday was reasonably confusing in terms of Sterling movement as a much better-than-expected construction PMI failed to make a huge impact.
It transpired that the reasoning for this was as a result of a government poll which indicated that the gap between those in favour and those opposed to Scottish independence had narrowed considerably.
A YouGov survey for the Sun newspaper indicated that there was a dramatic shift in favour of Scottish independence.
Less than a month ago the pro-union lead over the nationalists was around 22% which fell to about 14% in mid August. The latest poll showed a huge drop to only 6% and investors reacted accordingly.
Hans Redeker, head of global currency strategy at Morgan Stanley, commented; ‘With the Scottish independence referendum approaching, the narrowing of the opinion polls is having a more direct negative impact on the Pound’.
Tuesday’s Global Dairy Auction saw dairy trade fall to its lowest level since August 2012 at around 6%.
As one of the foremost producers of dairy products New Zealand was heavily affected, and the New Zealand Dollar plummeted versus all of its major competitors.
Arthur Chambers, rural expert at national consultancy firm Carter Jonas said: ‘The weather in 2012-13 certainly had a detrimental impact on farm incomes but a year on and perhaps of more concern is the dramatic fall in commodity prices we have experienced in recent months.’
He went on to say: ‘The severity of these falls has taken many commentators and farmers by surprise and with US oil and gas supplies now being dramatically increased via fracking, there is reduced demand for maize going in to bio fuels which will impact world markets for arable produce.’
The Pound Sterling to New Zealand Dollar exchange rate has hit a low today of 1.9784.
Wednesday has seen the Pound Sterling to New Zealand Dollar hold steady despite a lack of domestic data pertaining to the South Pacific nation. The slight increase in demand for ‘Kiwi’ (NZD) is likely to be connected to positive economic data results from one if its largest trading partners China.
The Chinese Non-Manufacturing PMI Increased from 54.2 to 54.4, the Composite PMI rose from 51.6 to 52.8 and the Services PMI jumped from the previous figure of 50 to 54.1.
UK economic data printed above expectation on Wednesday but has had little impact on Sterling movement as the anxiety over the Scottish Referendum has micrified the positive results.
The UK Composite PMI increased from the previous figure of 58.6 to 59.3.
Crucially the Services PMI also showed a better-than-forecast result having been expected to fall from 59.1 to 58.5, the actual data showed an increase to 60.5.
Given that services makes up by far and away the majority of the British economy; it is unlucky that Sterling hasn’t benefitted from this recent score.
Forecast for the Pound to New Zealand Dollar Exchange Rate
With very little by way of economic data publications for the rest of the week, the New Zealand Dollar is likely to continue its bearish run in light of the falling dairy prices.
Any movement, therefore, is likely to be dictated by foreign currency changes.
Thursday will be an influential day from a British perspective as the Bank of England policymakers will meet to discuss the current interest rate.
Most economists agree that there is very little likelihood that the interest rate will be altered from its current 0.50%, but investors will be interested to see if there are any more dissenters as seen from the previous policy meeting.
The Pound Sterling to New Zealand Dollar exchange rate has hit a high today of 1.9853.
The Pound Sterling to New Zealand Dollar exchange rate is currently trending in the region of 1.9773.
Despite New Zealand House Prices showing a declination on Thursday from 7.6% previously to 6.9% in August, the ‘Kiwi’ (NZD) is holding strong against the Pound. This is likely to be in anticipation of the crucial Bank of England interest rate decision due for publication later in the day.
Although it is widely accepted that the Bank of England policymakers are unlikely to alter the current bank rate or introduce any major monetary policy changes, it will be of interest to those invested in the pound to see if all of the policymakers are united in their decision.
Expect the Pound to ‘Kiwi’ exchange rate to experienced volatility over the course of the day with several key publications on Thursday’s economic calendar.