Foreign Currency Market Update – GBP / NZD Update
Over the past week the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within the range of 2.3943 to 2.4619.
The British asset fluctuated versus its major peers last week amid uncertainties regarding the extent of the fallout from China’s slowing economy. Wednesday of last week saw the Pound dive versus its currency rivals after domestic data produced disappointing results. July’s Industrial Production came in at 0.8% on the year, missing the median market forecast 1.4% growth. July’s Manufacturing Production declined by -0.5% in the year which was well below the market projection of 0.5% output. In addition, UK trade data revealed a marked widening of the nation’s deficit. Sterling extended losses later in the European session after August’s NIESR Gross Domestic Product Estimate forecast growth slowing from 0.7% to 0.5%.
As last week progressed, however, the Pound recovered losses thanks to comparatively hawkish sentiment from Bank of England (BoE) policymakers. Although the BoE held the cash rate, officials remained sanguine regarding the impact of China’s economic fallout of the UK. Over the weekend, however, the Pound declined versus many of its major peers in response to the news that the Labour Party Leadership was won by Jeremy Corbyn. Corbyn is Euro-sceptic so his victory reignited fears that the UK is heading for an exit from the European Union.
Meanwhile, the New Zealand Dollar fluctuated versus its major peers over the course of last week thanks to changes in market sentiment. With the situation in China having a significant impact on New Zealand’s exports, the ‘Kiwi’ (NZD) generally softened versus most of its currency competitors. China’s economic slowdown is a particularly big worry for New Zealand’s dairy market given the marked drop in demand for the commodity from the Far East nation.
Aiding the ‘Kiwi’ depreciation last week was the decision by Reserve Bank of New Zealand (RBNZ) policymakers to cut the overnight cash rate from 3.0% to 2.75%. The Oceanic currency declined by over 1.5% against the US Dollar in response to the rate cut. The cut followed a sharp decline in export prices with China’s economic slowdown creating headwinds to New Zealand’s economic recovery. Governor Graeme Wheeler also suggested that there is plenty of room for further rate cuts should additional intervention prove necessary.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within a close range on Monday morning.
After depreciating significantly in response to the Corbyn victory, the Pound recovered losses during Monday’s European session. Positive interest rate related remarks from key BoE officials and assurances from Jeremy Corbyn’s team that the UK will remain within the EU contributed to Sterling’s gains.
Although market sentiment remains fragile after Sunday’s mixed Chinese economic reports, the New Zealand Dollar edged higher versus many of its major peers during Monday’s European session. The ‘Kiwi’ uptrend is the result of August’s Performance of Services Index which came in at 58.2; bettering the previous figure of 56.6. The Oceanic currency’s gains are unlikely to be sustained, however, given the ongoing uncertainties surrounding China’s economic stability.
Wednesday’s NZ second-quarter Gross Domestic Product report is likely to cause changes for the New Zealand Dollar while Thursday’s Federal Open Market Committee (FOMC) interest rate decision will have a significant impact on commodity-driven currencies. If the FOMC opt to increase the benchmark interest rate, the New Zealand Dollar will dive in response.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within the range of 2.4346 to 2.4497 during Monday’s European session.
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