Increased risk aversion added downward pressure on the New Zealand Dollar complex recently, although the British Pound has been on equally bearish form of late.
ASB Bank has a dovish prediction for the New Zealand economy, although the New Zealand dollar exchange rate still remains strong against EUR, USD, AUD and GBP today.
According to the bank, New Zealand’s economy will continue to slow over the next two quarters, bottoming out 2.2% growth, with population growth accounting for most of New Zealand’s expansion, as per-capita growth has stagnated.
The performance over the last four months for dairy prices has been negative overall, with six of the last eight auctions seeing a drop in value, weakening the NZ dollar against the pound sterling.
The British pound to New Zealand dollar exchange rate could see a sharp downtrend fairly soon.
However, that pattern could change soon if New Zealand whole milk powder (WMP) futures are correct, as they are pricing in a rise above US$2,000 per metric tonne in July and a continued increase towards US$2450 by mid-November, which would considerably strengthen NZD/GBP.
It has been a particularly rough week of trading on the British pound to New Zealand dollar spot exchange rate, with global market turmoil having deepened in spite of the temporary closure of the Shanghai Composite Index.
Today's NZD exchange rate crosses are performing well, but which are the best winners and losers so far?
- The NZ dollar to Canadian dollar conversion is 1.32 pct lower today.
- The New Zealand dollar has slumped back vs the Swiss Franc by 0.65 pct so far.
- The NZD isn't fairing so well against the CNY and Aussie dollar, down -0.42 pct and -0.12 pct respectively.
- The pound to New Zealand dollar exchange rate continues to rise, gaining 1.03 per cent compared to the day's open.
- NZD /EUR spot rate is also down 0.64 pct today.
- The NZ dollar is 0.469 per cent in the red vs the US dollar (USD).
Pound Sterling (GBP) has been weighed down by disappointing Industrial Production figures and a weaker NIESR GDP estimate, as economists were inclined to push back their estimates for when the Bank of England (BoE) will ultimately opt to begin tightening monetary policy.
With Fed Chair Janet Yellen having taken a less dovish tone with regards to the possibility of future interest rate hikes the New Zealand Dollar (NZD) was equally bearish, however, as the odds of a consequent Reserve Bank of New Zealand (RBNZ) rate cut seemed to increase.
Before we continue with the news, here are today’s FX rates for your reference:
On Friday the Pound to British Pound exchange rate (GBP/GBP) converts at 1
At time of writing the pound to pound exchange rate is quoted at 1.
The GBP to USD exchange rate converts at 1.248 today.
FX markets see the pound vs swiss franc exchange rate converting at 1.14.
Please note: the FX rates above, updated 26th Apr 2024, will have a commission applied by your typical high street bank. Currency brokers specialise in these type of foreign currency transactions and can save you up to 5% on international payments compared to the banks.
GBP/NZD exchange rate hindered by EU exit uncertainty.
Also dragging on the British pound is the persistent uncertainty over the UK’s future within the European Union, as negotiations continue over a draft proposal circulated by European Council President Donald Tusk.
In the coming week European leaders will be meeting to vote on the proposed adjustments to the UK’s relationship with the EU, with Prime Minister David Cameron hoping to secure agreement in order to trigger a June referendum.
However, regardless of any agreement the outcome of the vote remains uncertain, as researchers at Goldman Sachs note:
’In our view, the renegotiation under way will result in some improved terms for the UK its membership of the EU. But it does not offer substantial changes. And, more fundamentally, the UK continues to face the same basic choice – whether it wants to belong to a 28-member union or not.’
Regardless, if the current proposal fails to garner substantial support from other EU leaders the Pound is expected to enter a fresh slump as investors look to minimise exposure to the risk of a potential ‘Brexit’.
New Zealand Dollar Forecast to Soften as Dairy Prices Extend Downtrend
Confidence in the New Zealand Dollar (NZD) exchange rate complex is likely to remain generally weaker this week, though, as forecasts suggest that the latest GlobalDairyTrade auction will see another drop in prices.
Slowing global demand continues to hang over the New Zealand dairy industry, with consequent declines in production equally exacerbating pressures on the wider economy as farmers struggle with narrowing margins.
Should prices continue to weaken this is likely to encourage increased dovishness from the RBNZ, adding to speculation that another rate cut is imminent and softening the New Zealand Dollar against rivals.
Weaker UK Inflation Predicted to Push GBP-NZD Exchange Rate Lower
Even so, the GBP/NZD exchange rate is expected to remain bearish if the UK’s January inflation data demonstrates further weakness within the domestic economy, adding to the downside risks facing the Pound.
Forecasts point towards a slight dip in the core Consumer Price Index, although this could be countered by baseline inflation remaining steady at growth of 0.2% on the year.
As inflationary pressure is nevertheless set to remain well below the BoE’s 2% target for the foreseeable future, though, even a steady result may not prove sufficient incentive for investors to buy back into the struggling Pound this week.