Foreign Currency Market Update – GBP / NZD Update
The New Zealand Dollar took advantage of weakness in safe-haven assets to advance last week, although the renewed strength of the US Dollar (USD) and an impending interest rate decision has seen the ‘Kiwi’ slide again.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate reached a high of 0.4476 and a low of 0.4335 during the past seven days.
The ‘Kiwi’ (NZD) started the week positively, with the NBNZ Business Confidence index rising from 10.5 to 14.6 and the ANZ Activity Outlook increasing to 32.0. Pound Sterling was hit by UK Mortgage Approval figures, as a slight rise exasperated fears of a housing bubble.
Tuesday’s GlobalDairyTrade auction results came as something of a relief as they posted the first rise in the price of the country’s chief export in six weeks. The Average Winning Price rose from US$2345 to $2419, with the GDT Price Index rising 3.6%. Pound Sterling was kept low despite news that all of the UK’s major lenders passed the Bank of England’s (BoE) stress tests, as growth in the manufacturing sector was shown to have slowed more than expected.
After three days of overall losses, the GBP/NZD exchange rate surged from a low of 2.2406 to 2.2775 as trader attention turned to the Euro (EUR) following a surprise decision by the European Central Bank (ECB) to only push the deposit rate 0.1% further into negative territory and leave the scale of Quantitative Easing at the current level. The Euro saw massive gains as traders deserted high-risk assets such as the ‘Kiwi’, while Pound Sterling appreciated thanks to positive UK services and composite PMIs.
The GBP/NZD exchange rate was unable to hold onto its gains for long, with the New Zealand Dollar rebounding on Friday to end the week up against Pound Sterling. The renewed strength was caused by the release of the US Non-Farm Payrolls, which showed that the US private sector created 211k new jobs in November. While this was good news and upped the odds of a Fed rate adjustment taking place next week, the gains recorded by both the ‘Aussie’ and ‘Kiwi’ in the wake of the jobs report indicate that investors are ready for the first US rate increase since 2006.
The NZD/GBP exchange rate has started this week trending down against Pound Sterling, as traders await the Reserve Bank of New Zealand’s (RBNZ) latest interest rate decision. The RBNZ meets during Wednesday’s antipodean session and is expected to cut interest rates from 2.75% to 2.50%. The Bank of England meets the following day to discuss UK monetary policy. As both interest rates and the level of asset purchases are expected to remain unchanged, investors will be looking to the accompanying minutes for guidance on the central bank’s attitude to raising interest rates in 2016.
Heads Up
Summary of major upcoming data releases that we think may move the market.