The New Zealand Dollar weakened against the Pound on Wednesday and fell by more than half a cent against the US Dollar after the latest dairy price auction showed that New Zealand’s biggest export fell further in value.
According to Fonterra’s latest Global Dairy Auction milk powder prices rose by 3.4%, however investors were left disappointed as the report also showed that forward contract prices fell.
‘We actually saw contracts for delivery in February declining by 5.7%. This has meant markets are focused on the fact that there has been little sign of a bounce in milk prices for future delivery. At present, in order to achieve current milk price payouts forecast, we would need to see that sort of bounce occurring,’ said ANZ senior foreign exchange strategist Sam Tuck.
The ‘Kiwi’ was also under pressure as the US Dollar strengthened broadly on Tuesday as speculation increased that the Federal Reserve is edging closer to raising interest rates. A run of positive economic data releases has aided the ‘Greenback’ at the expense of commodity and emerging market currencies.
‘The US Dollar is bid right across the board. The Kiwi has under-performed on most of the crosses as well, but sentiment is much worse on the continued decline in dairy prices and the speculation that interest rates are on hold for the rest of the year,’ said Sue Trinh, senior currency strategist at RBC Capital Markets.
Disappointment that there will be no further rate hikes by the Reserve Bank of New Zealand also continued to disappoint the markets. The Central Bank said that it would hold off on raising interest rates, as it believes that the nation’s economy is not robust enough to increase inflation of raise the price of dairy products.
New Zealand Dollar to Pound Sterling (NZD/GBP) Exchange Rate Forecast
The Pound made gains across the board and was likely to hold onto those after news broke that two members of the Bank of England’s Monetary Policy Committee voted in favour of raising interest rates at the Central Bank latest policy meeting.
The news surprised economists who had been expecting only one dissenter amongst the MPC’s nine members.
The fact that two policy members voted in favour of a rate hike caused traders again raise their bets that a rate hike is on the cards before the end of the year.
New Zealand Dollar to Pound Sterling (NZD/GBP) Exchange Rate Continues to Soften
Following yesterday’s publication of the Bank of England minutes the Pound made gains across the board.
The New Zealand Dollar has continued to show losses against most of its major peers since Monday’s poor commodity data. The decline in dairy sales has seen investors pulling away from the ‘Kiwi’ (NZD) as a risk aversion tactic.
This morning has seen several New Zealand domestic data releases; but they have not helped in terms of boosting the ‘Kiwi’. Consumer confidence has declined and year-on-year credit card spending has fallen from 7.0% to 4.5%.
UK retail sales data is due for release this morning. If the results meet with or exceed expectations the Pound is very likely to continue on this bullish run.
New Zealand Dollar (NZD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
New Zealand Dollar,
,US Dollar,0.8394 ,
New Zealand Dollar,, Pound Sterling,0.5051 ,
New Zealand Dollar,,Euro,0.6307 ,
New Zealand Dollar,,Australian Dollar,0.9035 ,
Euro,, New Zealand Dollar ,1.5834 ,
US Dollar,, New Zealand Dollar ,1.1896 ,
Australian Dollar,, New Zealand Dollar ,1.1060 ,
Pound Sterling,, New Zealand Dollar ,1.9775 ,
[/table]
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