New Zealand Dollar (NZD) Exchange Rate Recovers Ground ahead of RBNZ Gathering
The Pound to New Zealand Dollar exchange rate shed 0.05 per cent on Thursday after trading in a stronger position for much of the week.
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Sterling had been enjoying a bullish relationship with several of its most traded currency counterparts as a result of declining dairy prices (dairy produce is New Zealand’s main export) and the belief that the Reserve Bank of New Zealand might revise its current rate hiking programme.
As well as weakening against the Pound the New Zealand Dollar slid to a three-month low against its Australian counterpart.
However, the commodity-driven asset recovered some losses overnight as investors grew more confident in New Zealand’s economic outlook.
The NZD/USD, NZD/GBP and NZD/EUR pairings all strengthened.
Bets that RBNZ Governor Graeme Wheeler would reduce his interest rate forecast for the year at next week’s policy meeting have fallen and the ‘Kiwi’ has climbed as a result.
In the opinion of market strategist Imre Speizer; ‘The market is coming to their senses and realised they have overdone how much they think the Reserve Bank will downgrade their interest rate track next week.’
Influential economic reports for the South Pacific nation have been in short supply this week, but New Zealand’s prospects remain fairly upbeat as recently introduced stimulus has boosted the performance of China, New Zealand’s main trading partner.
This was evidenced during Australasian trading as China’s HSBC composite PMI rose from 49.5 in April (below the 50 mark separating growth from contraction) to 50.2.
However, China’s services measure did droop modestly and the International Monetary Fund asserted that the nation should hold off on introducing further stimulus measures.
IMF official David Lipton asserted; ‘We consider that vulnerabilities have risen to the point where containing them should be a priority and therefore further stimulus should only be deployed if growth slows significantly below this year’s growth target.’
The gains in the AUD/NZD pairing were also enabled by the news that Australia recorded an unexpected trade deficit in April.
During the European session an unexpectedly rapid increase in UK house prices helped the GBP/NZD pairing remain supported.
While today’s BoE rate decision could have a modest impact on the Pound to New Zealand Dollar exchange rate, volatility will be low unless the central bank adopts a surprising stance.
Today’s US initial jobless claims figures may dictate NZD/USD movement.
Overnight New Zealand’s house price report will be of interest.
The New Zealand Dollar is currently trading against the British Pound in the region of 0.5033 and is trading against the US Dollar in the region of 0.8438.