The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate strengthened by around 0.50% on Tuesday afternoon.
After British data showed inflation fell to the joint lowest level on record, the Pound softened versus all 16 of its major peers. This will ease pressure on the Bank of England to hike rates, but could lead to looser monetary policy if inflation continues to decline. However, as Tuesday progressed, the Pound regained some of its losses as the core consumer prices data indicated that the declination was beyond control.
The New Zealand Dollar is trending lower versus most of its major peers amid fears that a huge drop in dairy prices could lead to crisis in the industry.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending in the region of 1.9620.
Pound Sterling (GBP) Exchange Rate Plummets on CPI Data
British data printed poorly on Tuesday, compounding Sterling’s declination. Although the Core Consumer Price Index met with the median market forecast of a rise from 1.2% to 1.3%, December’s yearly CPI declined beyond the market consensus of a drop from 1.0% to 0.7%, with the actual data falling to a joint record low of 0.5%.
‘A lack of UK inflation pressure and the associated risk of an extended period of unchanged BOE policy supports our view that diverging UK-US monetary policy will weigh heavily on GBP/USD over the coming year,’ stated Barclays Plc currency strategists.
Although the drop in inflation has caused the Pound to slump initially, it’s not all bad news as economist Ben Brettell states; ‘A reduction in fuel costs is good news for the UK economy, and can be seen as broadly analogous to a tax cut. It should ease the pressure on household budgets and boost consumer spending.’
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate dropped to a low today of 1.9422.
New Zealand Dollar (NZD) Exchange Rate Softens on Dairy Prices
Continued declination in dairy prices has seen the ‘Kiwi’ (NZD) soften versus many of its major peers. The cooling prices are amplifying fears that the industry is facing its biggest crisis to date. ‘farm costs remain some 36 per cent higher than they were eight years ago and the single largest cost component of a dairy farm, animal feed, is more than 50 per cent higher than 2007 level,’ stated NFU president Meurig Raymond.
The decline in dairy prices outweighed positive data pertaining to New Zealand. The ANZ Truckometer Heavy increased from -2.8% to 2.1%, and Weekly Consumer Confidence ticked higher from 11.7 to 112.0.
Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast to Soften
Although dairy prices will hold the ‘Kiwi’ back, the large decline in British inflation is likely to overshadow issues with commodities. Therefore, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is likely to continue trending lower on Tuesday.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate reached a high today of 1.9542.
