NZ dollar gains against pound, euro, as growth concerns weigh
By Tina Morrison
Aug. 7 (BusinessDesk) - The New Zealand dollar rose against the British pound and the euro ahead of central bank meetings today amid concerns about faltering economic growth in the region.
The kiwi advanced to 50.29 British pence at 8am in Wellington, from 49.96 pence at 5pm yesterday and increased to 63.33 euro cents from 63.05 cents. The local currency gained to 84.70 US cents from 84.28 cents yesterday.
The pound weakened ahead of the Bank of England meeting today after data showed industrial and manufacturing output grew less than expected in June, cooling expectations the bank will raise interest rates this year. The euro dropped after Italy said it unexpectedly fell into recession again in the second quarter and a report showed German industrial orders slumped at their steepest rate in almost three years in June. Also weighing on the currencies is investor caution over the conflict in Ukraine.
Both the euro and the pound "continued to sink", Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York, said in a note.
"Overall Eurozone growth may be moving back to zero with periphery economies such as Italy already back in recession," he said. "If Germany, which is the locomotive of the region, is unable to revive demand in the foreseeable future, the ECB may be facing a much greater policy challenge in the second half of this year and may be forced to expand its extraordinary measures far beyond its initial intent."
Meantime, "the prospects for an early Bank of England rate hike grow dimmer and dimmer with UK growth appearing to have peaked earlier this year," Schlossberg said. "With demand in Europe slowing down significantly and financial markets looking like they are about to correct, it is difficult to see how the UK economy can recover its growth momentum from the start of this year."
Neither the BoE nor the ECB are expected to change their benchmark interest rates from record lows at today's meetings, however traders will be watching ECB president Mario Draghi's media conference for hints on future policy.
In New Zealand today, state valuer Quotable Value is scheduled to release its latest house price data at midday.
The New Zealand dollar was little changed at 90.61 Australian cents from 90.58 cents at 5pm yesterday ahead of scheduled releases today on Australian's labour market, tourist arrivals and construction.
The kiwi was little changed at 86.48 yen from 86.44 yen yesterday ahead of the Bank of Japan meeting tomorrow. The trade-weighted index advanced to 79.32 from 79.07 yesterday.