NZD strengthens on PPI and dairy prices
New Zealand’s producer price index rose by 0.9% in the last quarter of 2023. That was more than double the market expectations. Add in the 0.5% rise in global dairy prices and there are good reasons for the New Zealand dollar to pick up some buyers. The GBP/NZD rate is down to NZD 2.0395 this morning. That is a 5-week low and, technically speaking, there is nothing much to support this rate until we near NZD 2.00. We will see New Zealand’s trade balance data late this evening. NZ has been running a substantial trade deficit since the middle of 2021 and this data should show another shortfall but the deficit has been shrinking since it turned around in the middle of 2023 and there is an expectation that that trend will continue in this data. If so, we ought to expect further strength in the Kiwi dollar and that’s not good for those looking to buy the NZD.
UK Government borrowing largest drop since 2012
The UK public sector posted a £17.62 billion drop in borrowing in January. January surpluses are somewhat inevitable due to the self-assessment deadline at the end of Jan and the tax bonanza this flurry of activity elicits. However, this was more than twice the borrowing drop reported in Jan 2023 and the largest monthly surplus since 2012. Sterling has benefitted from this news to some degree. The GBP/USD rate is up to $1.2630 and the GBP/EUR rate is back up to €1.1680.
USD on pause ahead of Fed meeting minutes
The US dollar has lost a little ground overnight ahead of this afternoon’s release of the minutes from the last Federal Reserve Open Market Committee meeting. As you know, The Fed chose to keep their base rate on hold at that meeting but we heard the other day that they did discuss the potential for higher interest rates at a time when the markets are looking for them to lower the rates to more normal levels. So the content of these minutes will be very interesting to read (if you like that sort of thing) and there is every chance we will see some US dollar volatility this afternoon. As at this morning. GBP/USD is around $1.2630 and the EUR/USD rate is just above $1.08.