Foreign Currency Market Update – GBP / NZD Update
The past week has seen the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate rapidly decline as milk prices have risen and hopes for a satisfactory conclusion to the much-debated Trans-Pacific Partnership (TPP) this week have bolstered the ‘Kiwi’.
Last week, the GBP/NZD pairing saw little cause for optimism as Monday’s high of 2.4088 was followed by lows of 2.3494 towards the end of the week.
The primary cause for Sterling’s poor performance against the New Zealand Dollar positive developments in New Zealand’s economy. The price of milk remained on a downtrend over the course of September, but the end of the month marked an unexpected improvement, with the price rising consistently from September 30th onwards. The price of the New Zealand commodity has advanced from below $15.40 on September 30th to over $15.60 and has showed few signs of returning to yet another disheartening downtrend.
The other major boost to the ‘Kiwi’ has been an apparent solidification of an agreement on the TPP, a multinational trade agreement that has been in the making since 2010. New Zealand stands to benefit greatly from the arrangement, but disputes over who comes out best from the deal and how long certain monopolies should last have stalled proceedings for an interminable amount of time. As it stands, expectations are for a finalisation of the deal within the week, although no date or time has yet been set.
Today, the Pound has lost out against the ‘Kiwi’ to an even greater extent than last week, seeing a drop off from a starting high of 2.3607 to 2.3294 following the news that the UK Services PMI for September had dropped off.
This week, Pound Sterling/New Zealand Dollar exchange rate movement may occur as a result of the Bank of England’s (BoE) Interest Rate Decision and accompanying minutes, the Federal Reserve Minutes from their September 16th-17th meeting and the New Zealand Card Spending figures for September.
No change in fiscal policy is expected from the BoE’s decision so instead the minutes will be the centre of attention on Thursday as they may reveal dissent among Monetary Policy Committee (MPC) members over when an interest rate hike may occur.
The Fed’s minutes will possibly have a reduced impact compared to normal as they were compiled prior to last week’s dreadful labour market statistics.
Forecasts are optimistic for the New Zealand card spending result; current estimates are for 0.4% growth, the same as was recorded last month.
Heads Up
Summary of major upcoming data releases that we think may move the market.