Tuesday’s European trading session saw the Pound edge higher against the New Zealand Dollar.
The British asset advanced on the ‘Kiwi’ as investors remained cautious amid a turbulent political environment in nations like Ukraine and Vietnam.
As Australia is New Zealand’s largest trading partner the currency was also adversely affected by the news that the Reserve Bank of Australia intends to keep interest rates at record lows for the foreseeable future.
However, the NZD/AUD pairing was able to strengthen after top ratings agency Standard & Poor’s intimated that Australia could lose is AAA debt rating if the country’s budget deficit isn’t diminished.
As stated by industry expert Mark Johnson; ‘Australian Dollar weakness might be attributable to S&P’s warning shot last night that if they do not sort out the budget deficit they might lose their AAA rating. That’s keeping pressure on that currency.’
The Pound to New Zealand Dollar pairing (GBP/NZD) consolidated gains after the UK’s consumer price index was published.
In April CPI advanced by 1.8 per cent on the year, beating estimates for an annual gain of 1.7 per cent and taking inflation closer to the Bank of England’s 2 per cent target.
Consumer price inflation climbed by 0.4 per cent on the month versus expectations for a monthly increase of 0.3 per cent in April.
Core inflation was up 2.0 per cent, up from a reading of 1.6 per cent in March.
As inflation is pushing back towards the BoE’s goal level the odds of the central bank introducing an interest rate increase before the end of the year have risen.
The Pound consequently advanced against almost all of its major currency counterparts, climbing against the New Zealand/Australian Dollars and achieving a 16-month high against the Euro.
However, one analyst with Capital Economics did point out; ‘Prices for many goods- such as airfares – were boosted by the Easter holidays compared to a normal level of prices in April 2013. Clearly, this boost to the annual inflation rate will unwind next month.’
The GBP to NZD pairing may hold its gains over the next few hours, but New Zealand’s net migration figures and credit card spending data could have an impact overnight.
Furthermore, with the BoE meeting minutes and the UK retail sales report due out tomorrow, additional volatility in the Pound to New Zealand Dollar exchange rate can be expected.
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,0.8578,
New Zealand Dollar,,Euro,0.6268,
New Zealand Dollar,,Australian Dollar,0.9260,
New Zealand Dollar,,Pound Sterling,0.5111,
US Dollar,,New Zealand Dollar,1.1608,
Euro,,New Zealand Dollar,1.5957,
Australian Dollar,,New Zealand Dollar,1.0802,
Pound Sterling,,New Zealand Dollar, 1.9519,
[/table]
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