The Pound has strengthened against many major currencies over the last week and registered notable gains against weakened commodity-correlated currencies.
However, the New Zealand Dollar has remained sturdy due to signals of a strong NZ economy, meaning GBP/NZD has largely fluctuated below the week’s opening levels of 1.8141. The pair attempted to advance on Wednesday morning but struggled to climb higher than 1.8130.
Pound (GBP) Advances on UK Data, Short Positions
Sterling has continued to advance this week and has held sturdy even against its most bullish rivals as market attention has turned towards the performance of the UK economy.
The British currency’s recovery rally has been largely undisturbed thanks to a steady stream of better-than-expected August ecostats, which have indicated to some analysts that the British economy would not face as sharp a downtick as feared.
Wednesday saw the publication of GfK’s August consumer confidence print for the UK, which improved from -12 to -7, beating expectations of -8.
Nationwide’s August house prices report was also optimistic. Prices were forecast to worsen considerably in August, but instead improved from 5.2% to 5.6% year-on-year and from 0.5% to 0.6% month-on-month.
However, it has been noted that much of the Pound’s current value has been due to yet another record number of short positions on the currency – that is, bets that GBP will fall in value.
New Zealand Dollar (NZD) Sturdy Despite Risk-Off Movement
Last Friday’s increase in 2016 Federal Reserve rate hike bets has left the US Dollar stronger across the board, in particular draining the value of risk-correlated currencies like the ‘Kiwi’.
While this has weakened the New Zealand Dollar considerably, it has held its ground this week compared to its risky peers thanks to optimistic New Zealand data. A string of upbeat New Zealand data in recent weeks has left the ‘Kiwi’ in demand.
The latest report on the pile was the ANZ Business Outlook for August, which indicated that New Zealand’s economy was comparably healthy.
This encouraged analysts and investors to believe that further Reserve Bank of New Zealand (RBNZ) rate cuts in the near future are unlikely, boosting the ‘Kiwi’.
GBP/NZD Forecast: Quiet Week Ahead for NZ Data
Sterling is more likely to drive the Pound to New Zealand Dollar exchange rate in the coming week, as there is more key UK data on the calendar than New Zealand data.
While the ‘Kiwi’ has been sturdier than its commodity-correlated peers, it may struggle to advance much against the Pound due to the market’s risk-off movement. News that dents demand for the US Dollar is the best chance NZD has to advance.
The Pound, on the other hand, could continue its attempts to edge higher unless dire UK economic news is reported.
If Thursday and Friday’s August UK PMI figures improve further than expected, GBP/NZD could end the week better off despite its struggles to advance past the week’s opening levels thus far.