Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Advances, Oil Price Slide Saps Demand
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange climbed to a high of 2.0316 on Monday as demand for the commodity-driven ‘Kiwi’ was undermined by a decline in the price of crude oil.
In the view of strategist Raiko Shareef; ‘Market sentiment has shifted to something markedly less positive. Investors now appear concerned that the failure of oil prices to find a bottom is a symptom of chronically weak global demand. [Commodity currencies] were dragged lower by still falling oil prices.’
The New Zealand Dollar also declined against the US Dollar, with the NZD/USD exchange rate hitting a low of 77.61.
In the hours ahead the RBA meeting minutes and China’s Manufacturing PMI could impact the New Zealand Dollar exchange rate. If the index of China’s manufacturing sector falls from 50 to 49.8, as expected by economists, demand for the commodity-driven ‘Kiwi’ could ease and the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate may climb.
Earlier…
GBP/NZD Exchange Rate Trends in Narrow Range
The Pound Sterling to New Zealand Dollar (GBP/NZD) was trending in the region of 2.0199 during the Australasian session following the publication of a disappointing Performance of Services index for New Zealand.
The gauge slid from a negatively revised 57.0 to 54.8 in November.
According to industry expert Johnathan Underhill; ‘The PSI data comes before gross domestic product figures for the third quarter, due on Thursday, which are expected to show the economy grew 0.7 percent in the third quarter, based on a Reuters survey, unchanged from the pace three months earlier and slower than the 0.9 percent rate the Reserve Bank forecast this month. It comes after the performance of manufacturing index last week, which showed a decline from a 15-month high last month.’
Although the services index declined, it remained clear of the 50 mark separating growth from contraction. Further GBP/NZD movement could be caused in the hours ahead by the UK’s Rightmove House Price report.
Earlier…
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate declined toward the end of the week following the Reserve Bank of New Zealand’s (RBNZ) surprisingly hawkish interest rate decision and policy statement.
GBP/NZD Exchange Rate Trends Lower
Prior to the RBNZ gathering, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending higher as falling dairy, oil and iron ore prices depleted demand for the commodity-driven currency.
The New Zealand Dollar was also coming under pressure as a result of signs of weakness in Australia and China, New Zealand’s two largest trading partners, and the RBNZ’s attempts to talk the currency lower.
However, after the RBNZ insinuated that it would be un-pausing its interest rate hiking cycle next year, the New Zealand Dollar strengthened across the board.
RBNZ Interest Rate Announcement Spurs New Zealand Dollar (NZD) Exchange Rate Gains
In his monetary policy statement, RBNZ Governor Graeme Wheeler noted; ‘Modest inflation pressures suggest the expansion can be sustained for longer than previously expected with a more gradual increase in interest rates. Some further increase in the Overnight Cash Rate is expected to be required at a later stage.’
Industry expert Dan Bell said of the statement and the New Zealand’s subsequent movement; ‘The market was expecting a more downbeat statement and clearly we didn’t get that. Also, a lot of people have been selling the New Zealand Dollar so we are seeing a little bit of unwinding. The reaction looks a little bit overdone.’
When speaking of the New Zealand Dollar to US Dollar (NZD/USD) exchange rate, Bell stated; ‘New Zealand isn’t going to fall out of bed, even though dairy prices have halved this year […] the NZ Dollar/US Dollar cross will still be mostly driven by the US growth outlook, which is as positive as the NZ outlook.’
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate spent the week trending between highs of 2.05 NZ Dollars and lows of 2.01 NZ Dollars.
As well as gaining on the Pound, the New Zealand Dollar enjoyed a stronger relationship with the US Dollar (NZD/USD) and Australian Dollar (NZD/AUD) following the RBNZ policy statement.
This Week’s Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Forecast
While the UK’s economic calendar is fairly full next week, with UK inflation data, employment figures and retail stats all on the cards (along with the publication of minutes from the latest Bank of England (BoE) policy meeting), movement in the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate will also be driven by reports from the South Pacific nation.
Those ecostats with the most potential to drive GBP/NZD exchange rate movement include the Real Estate Institute of New Zealand House Price Index, the nation’s Performance of Services Index, New Zealand’s Current Account figures, Gross Domestic Product figures for the third quarter, net migration stats, the ANZ Activity Outlook gauge and domestic Credit Card spending numbers.
Poor NZ Growth Data Could Limit Demand for the New Zealand Dollar (NZD)
The growth data, scheduled for publication on Wednesday, will be of particular importance. New Zealand’s economy expanded by 0.7% in the second quarter, quarter-on-quarter. If the pace of expansion is shown to have slowed in the third quarter it could cause New Zealand Dollar losses.
The New Zealand Dollar recently came under stress as Australia posted particularly disappointing third quarter growth data. The Australian economy was shown to have expanded by just 0.3% in the three months through September, less than half the 0.7% growth anticipated. The data saw economists bet that the Reserve Bank of Australia will cut interest rates next year rather than increase them. A disappointing growth report for New Zealand could cause the RBNZ to reconsider its intention to resume its rate hiking cycle.
On Friday the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trading in the region of 2.0131.
