On Friday the GBP/NZD exchange rate fell broadly after the ‘Kiwi’ found support from the People’s Bank of China’s decision to cut benchmark rates. China is New Zealand’s biggest trading partner.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate softened on Thursday but was forecast to push higher as market attention turned to US economic data releases.
Earlier on Thursday the GBP/NZD exchange rate softened as weak data out of the Eurozone and China caused investors to increase their demand for the higher yielding ‘Kiwi’.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate rallied strongly on Wednesday as Bank of England minutes came in more hawkish than forecast and as concerns over Japan and dairy prices weighed on the ‘Kiwi’.
New Zealand’s most traded commodity of dairy products saw their value fall again overnight as the latest GlobalDairyTrade auction showed that dairy prices fell to the lowest level in more than five years.
The fall in prices sent the ‘Kiwi’ falling as economists increased their bets that the news would cause Fonterra (the world’s largest dairy exporter) to lower its milk payout forecast, which would harm farmer income and have, a negative impact upon the wider New Zealand economy.
‘There are plenty of people saying Fonterra will have to be revising down. If farmers are paid out less money then there’s a knock-on effect for surrounding industries,’ said Stuart Ive, senior dealer at OMF.
The auction showed that the average price for dairy commodities traded in the auction earlier today fell by more than 3% to $US2561, the lowest level since August 2009 and down from USD2,649 two weeks ago.
About 39,613 tonnes of product was sold, down from 45,499 tonnes of product two weeks earlier.
Also weighing upon the ‘Kiwi’ was the news that Japanese Prime Minister Shinzo Abe has announced plans to delay a sales tax rise and called for early elections after data showed that the world’s third largest economy slid into recession.
Data released on Tuesday showed that the Japanese economy fell back into recession in the third quarter of 2014 after it contracted by annualised 1.6%. The previous quarter saw a contraction of 7.3%.
The Pound advanced strongly after the BoE minutes showed that more policy makers than expected were still in favour raising interest rates.
‘The inflation report cited the risks to the UK economy and that supporting inflation is still the top priority. The market may have priced more MPC members voting against an interest rate rise this morning, but the unchanged vote figures bode well for sterling,’ said an economist.
