Foreign Currency Market Update – GBP / NZD Update
The GBP/NZD exchange rate traded in a seven-day range of 2.2240 to 2.2322 last week.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate surged last Wednesday to reach its strongest level since March 2011. The sharp rise came after the Reserve Bank of New Zealand cut interest rates by 0.25% to 3.25%. The rate cut was a surprise to some economists who had been expecting the bank to leave rates unchanged.
As this week got underway the New Zealand Dollar remained weaker against the Pound and slid to a five-year low against the US Dollar. Pressure on the ‘Kiwi’ is set to continue as economists speculate that the RBNZ will make another rate cut at some point in the near future. The surprise rate cut also has economists wondering how low RBNZ Governor Graeme Wheeler is prepared to take the rate.
Data released late on Sunday did little to support the New Zealand Dollar despite it showing that the nation’s services sector performed strongly in May. The Business NZ Performance of Services Index rose by 1.5 points to a reading of 58.0. The figure marked the highest level for the index since the middle of last year. According to the index, any number above 50 indicates expansion whereas one below indicates contraction.
‘The service sector has been a standout performer for some time. May’s PSI results simply reinforce this narrative. Not only has the index shown continuous expansion for almost 5 years, but it has been at a good pace too. We think the service sector will be a positive contributor to economic growth in the March quarter, with that data due out on Thursday,’ said BNZ senior economist Doug Steel.
The New Zealand Dollar is expected to remain under pressure against the Pound and US Dollar throughout the week as economists turn their attention to the latest Fonterra dairy auction and the release of domestic gross domestic product (GDP) data. Another disappointing auction will heighten worries over the dairy industry (the nation’s largest) and the overall economy. The US Federal Reserve is also set to announce its rate decision midweek.
On Tuesday, the Pound Sterling is expected to experience volatility due to the release of inflation and PPI data. Wednesday will see the Bank of England release the minutes of its June policy meeting and unemployment data is also due for publication. If that data comes in positively we can expect to see the Pound make further gains against the ‘Kiwi’.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trending in the region of 2.2268
Heads Up
Summary of major upcoming data releases that we think may move the market.