Global conflicts and political uncertainty have increased risk for commodity based currencies. The RBNZ have released a statement highlighting how ill positioned NZD is against the Pound due to these global risks.

Kiwi crumbles under Sterling's surge

The Reserve Bank of New Zealand confirmed the New Zealand Dollar was ill positioned to limit the drive from the Pound given the lack of support within commodity based currencies at the moment, due to the tensions in North Korea and the political instability in France. Sterling’s surge on the back of Theresa May’s surprise U-turn yesterday morning certainly didn’t stop at the Kiwi, having gained almost 3% throughout the course of the day to hit 1.82.

Rise in global dairy prices provide support to NZD

As dairy is one of New Zealand’s strongest exports it is no surprise that a rise global prices helped the Kiwi establish itself against its commodity based currency counter parts, rising by 0.5% against the Australian dollar and 0.4% against the Chinese Yuan.

Whole milk powder climbed by almost 3.5% at the global dairy trade auction last night and drove investor sentiment. Analysts believe the 3rd consecutive rise in GDT prices suggests international partners are willing to pay a premium for New Zealand products.

Although these figures didn’t ease Kiwi losses against the Pound throughout yesterday afternoon I do believe they will provide support as dairy has proven itself to be a long term stabiliser for the New Zealand economy.

Economic data to drive New Zealand Dollar strength

I expect the fall out of Theresa Mays call for an early election to be the main driver for GBP/NZD rates in the days ahead however this evenings NZ business performance reviews and Kiwi Quarter inflation figures are expected to come in positive and could potentially spell the start of a recovery for the NZD.

As such It may be wise for those looking to buy the New Zealand Dollar to act sooner rather than later, to capitalise on the fantastic gains made by the Pound yesterday afternoon before Sterling is forced to retreat. Call us on 01494 725 353 to get a free quote or click here.


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