NZ dollar falls against British pound as Bank of England minutes seen more positive

The New Zealand dollar declined against a stronger British pound after upbeat minutes from the Bank of England’s last meeting, stoking expectations the next move in UK interest rates will be higher.

The kiwi dropped to 50.92 British pence at 8am in Wellington, from 51.39 pence at 5pm yesterday. The local currency slipped to 76.60 US cents from 76.81 cents yesterday.

The pound, measured against a trade-weighted basket of currencies, rose after BOE policymakers were more upbeat on the Eurozone and the prospects for higher inflation in minutes to their April meeting, published yesterday. All nine members of the Monetary Policy Committee voted to keep rates steady at 0.5 percent at the last meeting.

“The pound climbed in the aftermath of the release of the minutes from the BOE April meeting,” Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. “While the vote at the table was unanimous (9-0) for holding policy settings, the minutes showed keeping interest rates at a record low was a “finely balanced” decision for a minority of officials.”

In New Zealand today, traders are awaiting a lunchtime speech by Reserve Bank of New Zealand assistant governor John McDermott to the Waikato Chamber of Commerce and Industry about inflation. Data released this week showed the consumers price index fell 0.3 percent in the first three months of this year, the second quarter of deflation, mostly due to falling petrol and diesel prices. The annual inflation rate was 0.1 percent.


“His speech today is expected to provide colour for markets ahead of next week’s Official Cash Rate review,” said Martin. “With our CPI held down by lower commodity prices (fuel) and the ripe New Zealand dollar generally, the speech from McDermott should provide an insight into the view of inflation expectations. Some might even call it a mini Monetary Policy Statement.”


Traders will also be eyeing March migration data scheduled for release at 10:45am, to see if the country continues to experience record net inward migration. Meanwhile, the ANZ-Roy Morgan consumer confidence survey for April is scheduled for publication at 1pm.


Elsewhere, updates of manufacturing activity will also be eyed today, with Capital Performance of Manufacturing surveys released in China, Europe, and the US.


The New Zealand dollar slipped to 98.64 Australian cents from 98.80 cents yesterday after Australian inflation data yesterday met expectations. The local currency fell to 71.38 euro cents from 71.53 cents yesterday and was unchanged at 91.85 yen. The trade-weighted index weakened to 79.92 from 80.08 yesterday.

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