GBP to NZD Exchange Rate Trends Lower as Intervention Forecast
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate strengthened on Tuesday as investors bet that the Reserve Bank of New Zealand (RBNZ) will have to intervene in the currency market to temper the ‘Kiwi’s strength.
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Earlier on Tuesday the New Zealand Dollar dropped to an almost five-week low against the US Dollar as the forecast for milk prices was reduced.
Dairy products are New Zealand’s main export so after the Fonterra Cooperative Group Ltd cut its projection for milk values in the 2014-2015 period the ‘Kiwi’ broadly softened.
The commodity-driven New Zealand Dollar was already struggling against its US counterpart thanks to recent comments from RBNZ Governor Graeme Wheeler regarding the unsustainable and unjustified strength of the local currency.
The NZD/USD pairing shed 0.4% over the course of trading.
The Pound was also able to maintain a stronger position against the New Zealand Dollar in spite of some slightly dovish commentary from a prominent Bank of England (BoE) official.
Deputy Governor Ben Broadbent reiterated the International Monetary Fund’s recent comments about the Pound being slightly overvalued. He also stated that unless the economic situation in countries like the Eurozone improved, the UK’s economic recovery could slow up markedly.
Before the release of New Zealand’s Building Permits figures the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate consolidated gains as industry experts intimated that the RBNZ’s recent comments about the local currency could be hints of the central bank’s intention to intervene in the currency market to push it lower.
According to UBS currency strategist Geoffrey Yu; ‘There could still be a long way to go [the commentary] sounds like an intervention warning to the market. […] Expect the RBNZ to keep up its language or even gently step into markets, especially when its counterparts remain dormant.’
A survey conducted by Bloomberg News agency also estimates that the New Zealand Dollar will have weakened to 82 US cents by the middle of next year after dipping to 85 US cents at the close of 2014.
Pound Sterling to New Zealand Dollar (GBP/NZD) Forecast
New Zealand’s building permits figures had little effect on the currency market. Permits were shown to have increased by 3.5% month-on-month in June following a revised -4.4% decline in May.
The UK’s Lloyd’s business barometer could have an impact on GBP/NZD exchange rate movement in the hours ahead.
However, the day’s major news will be the second quarter growth data for the US.
If the world’s largest economy fails to expand by as much as economists are expecting in the second quarter of the year it will temper Federal Reserve rate hike expectations and could boost higher-risk currencies like the New Zealand Dollar.
Investors will also be looking out for the US ADP Employment Change report and focusing on the upcoming Federal Open Market Committee interest rate announcement.