British Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Softens; Five-Day Decline Forecast
While the Pound to New Zealand Dollar (GBP/NZD) exchange rate began the European session in a slightly weaker position, the ‘Kiwi’ was heading for a five-day decline against another of its major rivals.
The appeal of the New Zealand Dollar was limited overnight as investors bulked in the face of a concerning shift in the Ukraine situation, but a bout of profit taking saw Sterling broadly slide.
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Earlier this week considerable Pound gains were triggered by an unexpectedly upbeat UK Consumer Price Index.
The news that the rate of inflation in the UK accelerated by considerably more than anticipated in June caused a leap in the odds of the Bank of England hiking borrowing costs this year and helped Sterling achieve multi-month highs against its South Pacific rivals (the New Zealand and Australian Dollars) as well as multi-year highs against the US Dollar and Euro.
However, soft domestic wage growth took some of the shine of Sterling as the week continued, as did hints that the Scottish referendum could undermine its appeal and weaken it by up to 10%.
Profit taking also saw the Pound edge away from the week’s highs, although it continues to trend above 1.26 against the Euro and just above 1.71 against the US Dollar.
The Pound to New Zealand Dollar exchange rate fell by 0.1% as the European session began.
The ‘Kiwi’ was coming under pressure of its own as the tragic downing of a passenger jet heightened concerns regarding a potential escalation of the tenuous situation between Russia and Ukraine.
Shortly after news broke of the aviation disaster the market was plunged into turmoil and investors’ turned to safe-haven assets, reducing the appeal of higher-risk currencies like the New Zealand Dollar.
Additionally, New Zealand’s economic prospects took a hit when the nation’s dairy auction price fell yet again.
At this week’s Fonterra Global Dairy Trade auction product prices dropped by an average of 8.9%. As dairy products are New Zealand’s largest export this report wasn’t well received.
Furthermore, there are concerns that the Reserve Bank of New Zealand might be prevented from hiking interest rates when it gathers next week due to this week’s slightly soft domestic inflation data.
According to industry expert Mark Johnson; ‘From the weaker GlobalDairyTrade (GDT) auction, the slightly below consensus Consumer Price Index (CPI) print and throw in geopolitical risk with the Ukraine events and the Gaza Strip, all that conspired to risk-off sentiment for the market. The Kiwi’s been a casualty of that’.
The New Zealand Dollar is currently heading for a five-day decline of 1.3% against the US Dollar.
Next week a range of factors could be responsible for volatility in the Pound to New Zealand Dollar (GBP/NZD) exchange rate, including the publication of minutes from the latest Bank of England meeting (due out on Wednesday) and UK growth figures (scheduled for release on Friday).
Of course, the RBNZ rate decision could prove to be particularly market moving.
If the central bank refrains from increasing interest rates the New Zealand Dollar could fall.
The Pound to New Zealand Dollar exchange rate is currently trading in the region of 1.9708.