GBP/NZD Down Nearly -1% as Dairy Prices Leap 5.9%

Lack of Brexit Clarity Returns to Weigh on Pound Sterling Exchange Rates

Brexit woes continued to weigh on Pound Sterling yesterday, after an influential figure in the European Parliament commented that MEPs still have no idea what the UK government is actually aiming for from the Brexit negotiations.

The comments from Manfred Weber are just the latest from European officials concerned with a lack of information provided to them by the UK government.

It’s another quiet day for UK data today, but there could be more comments from EU officials regarding Brexit to keep the Pound volatile

German Industry Data Supports Euro; GBP/EUR Exchange Rate Weakens Despite Eurozone Retail PMI Slump

The GBP/EUR exchange rate slipped lower yesterday, with the Euro supported by a surge in German factory orders during December and a strong rise in the January German construction PMI.

Although the latest slew of retail PMIs all weakened, the 3.8% increase in factory orders month-on-month significantly bettered forecasts for 0.7% growth and kept markets on positive form.

The European Commission will release its latest economic forecasts this morning, which could undermine GBP/EUR if they indicate that the recent strength in the Eurozone economy is set to continue.

GBP/USD Slides as Markets Continue to Bet on March US Interest Rate Hike

Confidence that next month will see the Federal Reserve opt to hike interest rates again boosted the US Dollar and pushed GBP/USD lower yesterday. In fact, markets were so perturbed by the recent strong US jobs data that stock markets across the globe were plummeting as markets feared higher inflation and therefore sudden sharp increases in US borrowing costs.

USD buoyancy was dented somewhat by the latest trade balance figures, which showed a deficit -US$1 billion larger than expected at -US$53.1 billion.

Federal Reserve officials Robert Kaplan, William Dudley, Charles Evans and John Williams are due to speak throughout the day, so the US Dollar could fluctuate if they drop hints regarding the odds of an interest rate hike next month.

Canadian Dollar Resists Impact of Poor Trade Data, GBP/CAD Tumbles

Poor trade data failed to undermine the Canadian Dollar yesterday and so the Pound fell around -0.7% against the ‘Loonie’. Record high levels for imports pushed the December trade deficit down to -C$3.1 billion, against forecasts of a -C$2.3 billion shortfall.

The Ivy purchasing managers index for January also disappointed, falling from 60.4 to 55.2.

Canadian building permits data for December is set for release today.

Cautious Outlook on Monetary Policy from RBA Fails to Provide GBP/AUD Support

The Australian Dollar was largely on poor form yesterday, but not against the Pound. Markets were disappointed that the Reserve Bank of Australia (RBA) had opted to leave interest rates frozen for the 16th meeting in a row and signalled that wage growth would remain sluggish and therefore borrowing costs would not be increasing any time soon.

Australian trade data also disappointed, after showing a shock -AU$1.3 billion deficit instead of the expected AU$200 million surplus.

Surging Dairy Price Pushes GBP/NZD Exchange Rate Nearly -1% Lower

A strong increase in dairy prices during the latest global auction pushed the New Zealand Dollar much higher, resulting in losses for the GBP/NZD exchange rate of nearly -1%.

Dairy places climbed 5.9%, building on a 4.9% rise a fortnight ago and a 2.2% increase two weeks prior to that to take the average price per metric ton of dairy above US$3,500. This has erased much of the losses seen for prices of New Zealand’s most important commodity during 2017.

The Reserve Bank of New Zealand (RBNZ) will announce its latest monetary policy decisions this evening, so GBP/NZD could make gains during the day as markets stand pat on the ‘Kiwi’ until the latest monetary policy outlook has been revealed.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard