With nothing in terms of influential domestic data until Wednesday afternoon the Pound has continued to struggle under the weight of the ongoing Scottish bid for independence. Meanwhile the New Zealand Dollar has experienced a little volatility ahead of the Reserve Bank of New Zealand rate decision, due later on Wednesday evening.
The Pound Sterling to New Zealand Dollar exchange rate is currently trending in the region of 1.9570.
Tuesday’s economic calendar was extremely full from a British perspective, but the impact of any positive data had been micrified by the ongoing issues regarding Scottish independence. Trade balance data wasn’t particularly positive, with Total Trade Balance showing Britain’s trade deficit to have widened from -9.4 billion to -10.2 billion in July. The Office for National Statistics outlined the fact that this was the 5th consecutive month in which imports have exceeded exports.
Not all of the data was negative, however. Industrial Production eclipsed the market consensus of a 1.3% growth with the actual annual expansion of 1.7%, and Manufacturing Production equalled the forecast figure of 2.2% growth. Positive factory output is a sign that the objective to alter Britain from a consumer-driven to export-based economy may be slowly gathering momentum.
Sterling experienced a slight boost on Tuesday afternoon after Bank of England Governor Mark Carney addressed the TUC Congress in Liverpool. In his speech he outlined the possibility of a spring-time rate hike and the potential for wage growth by the middle of next year. More importantly, in terms of current affairs, was his stance on the Scottish referendum with specific reference to a shared currency. Carney suggested that a currency union would be ‘incompatible with sovereignty’. The hawkish remarks will have been greeted happily by the pro-Unionists, and seen as a major blow to Scottish Prime Minister Alex Salmond who assured Nationalists that an independent Scotland would keep the Pound.
The New Zealand Dollar struggled on Tuesday as traders priced-in the potential effect of low commodity prices. ‘Kiwi’ (NZD) movement has been generally bearish since Chinese and US imports data suggested that supplies of raw materials, such as crude oil, exceeded demand by a huge quantity; driving down global commodity prices and hurting commodity-based economies.
The Pound Sterling to New Zealand Dollar exchange rate has hit a low today of 1.9514.
Wednesday’s Pound to New Zealand Dollar exchange rate has experienced a fair amount of fluctuation ahead of some key economic events for both New Zealand and the UK.
On Wednesday afternoon several high-profile policymakers from the Bank of England will be giving a testimony on Augusts’ inflation report. The policymakers include Governor Mark Carney, David Miles, Martin Weale and Nemat Shafik and their comments have the potential to initiate volatility.
The Reserve Bank of New Zealand will be making their rate decision later on Wednesday evening. Whilst the general view of economists is that the rate will remain at 3.50%, the accompanying statement is much more likely to spark ‘Kiwi’ movement. Should the bank choose to introduce stimulus in order to combat falling commodity prices demand for the New Zealand Dollar will emulate the Euro and dampen significantly.
The Pound to New Zealand Dollar has reached a high today of 1.9602.
UPDATE
The Pound to New Zealand Dollar exchange rate surged by over 0.5% on Thursday as investors processed the fairly dovish rhetoric offered by the Reserve Bank of New Zealand following its latest interest rate announcement.
As expected by economists, the central bank opted to leave interests on hold.
However, the RBNZ also intimated that the cycle of interest rate hikes they embarked on earlier in the year could be on hold for longer than initially anticipated.
As stated by economist Dominick Stephens; ‘This monetary policy statement was much more ‘dovish’ than we anticipated. The RBNZ appears to have re-thought its inflation forecast in light of recent very soft inflation outcomes.’
The New Zealand Dollar also posted extensive declines against rivals including the US and Australian Dollars.
UPDATE 2
The Pound to New Zealand Dollar (GBP/NZD) exchange rate continued to rally on Friday as a strengthening US Dollar (USD) and concerns over falling commodity prices and weak inflation data out of China weighed upon the ‘Kiwi’.
The ‘Kiwi’s’ slide comes ahead of a key risk to the global currency market next week, when the U.S. Federal Reserve meets amid speculation that a stronger U.S. economy will prompt policymakers to send a clearer message about when they will start raising interest rates.
Comments made by Reserve Bank of New Zealand Governor Graeme Wheeler were also weighing on the currency after he said that the ‘Kiwi’s’ current level was ‘unjustified and unsustainable’.
