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 2.4070 to 2.4598.
In the aftermath of the Federal Open Market Committee (FOMC) decision to hold the cash rate, the New Zealand Dollar rallied versus its major peers. The appreciation is the result of heightened demand for high-yielding assets whilst US interest rates continue to provide little excitement for investors. Federal Reserve Chair Janet Yellen compounded negative sentiment towards the US asset after her dovish accompanying statement revealed that several policymakers moved rate liftoff expectations into 2016. The prospect of a longer delay to a Fed rate hike is positive for the Antipodean currency.
In addition to the dovish FOMC, the ‘Kiwi’ (NZD) advanced in response to improving dairy prices. New Zealand’s dairy exporter Fonterra cut a significant amount of jobs, helping prices to surge amid speculation of slowing output from the dairy giant. The latest Global Dairy Trade (GDT) auction saw prices rise by 16.5%.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending in the region of 2.4503 during Monday’s European session, having risen by over 1%.
On Monday the New Zealand Dollar declined versus its major peers for several reasons. The US Dollar strengthened thanks to speculation that Yellen was purposefully talking down the Dollar and that US policymakers will still look to hike the cash rate before the turn of the year. In addition, the New Zealand Dollar has seen subdued demand with commodities prices remaining comparatively weak, although dairy prices continue to advance. Also, China’s economic struggles could have a marked impact on New Zealand’s exports. If the issues continue in the Far East nation the Reserve Bank of New Zealand (RBNZ) is likely to ease monetary policy in the near-future.
The Pound Sterling to New Zealand (GBP/NZD) exchange rate advanced during Monday’s European session after Italian lender UniCredit forecast Sterling strength and a bullish Bank of England (BoE). Sterling gains may be short-lived, however, after it emerged that Chancellor George Osborne is looking to strike a deal to connect the UK’s stock markets with China’s Shanghai Composite Index. Increasing the UK’s exposure to China at this time could prove a risky move.
Looking ahead, New Zealand’s economic docket is comparatively sparse of domestic data publications. Wednesday’s Trade Balance data will be the only report with the potential to provoke ‘Kiwi’ volatility. With that in mind, New Zealand Dollar trade will be dictated by changes in market sentiment, developments in China and commodity price fluctuations.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trending within the range of 2.4294 to 2.4539 during Monday’s European session.
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