The Pound to New Zealand Dollar exchange rate fell to new historic lows last week, dropping to 1.69 as the ‘Kiwi’ surged on commodity news. While GBP/NZD recovered slightly by the weekend, the Pound struggled to achieve 1.71.
Pound (GBP) Limp as UK Data Fails to Offer Support
While last week saw the Pound’s best performance against most currency rivals in over a month, GBP failed to outperform the more resilient New Zealand Dollar.
During Tuesday’s session, Pound investors became more confident as the British government indicated that it would give MPs a vote on the final terms of a Brexit.
However, British data failed to offer the Pound any additional support later in the week. Thursday’s retail sales scores disappointed in every print, while Friday’s September public sector net borrowing score revealed a surprisingly high borrowing deficit of over £10b.
This left Sterling limp after Tuesday’s rally, as the currency lacked the support needed to many any kind of extended recovery.
New Zealand Dollar (NZD) Responds to Fluctuating Risk Appetite
The New Zealand Dollar has performed well over the last week, as NZ markets were cheered by last week’s Global Dairy Trade (GDT) auction. The auction revealed that prices of New Zealand’s biggest commodity export, milk, had avoided another October drop.
However, as demand for risky currencies weakened towards the end of the week due to higher bets of a Federal Reserve interest rate hike in December, the New Zealand Dollar moved away from its best levels.
The ‘Kiwi’ Dollar saw more volatile trade on Monday as risk-sentiment continued to slip. With the 8th of November’s US Presidential election now just over two weeks away, investor demand for ‘safe havens’ is high.
GBP/NZD Forecast: Will the Pound Recover?
The Pound to New Zealand Dollar exchange rate could make a more solid recovery over the next week or so, as slumping demand for risky currencies is likely to weigh on the ‘Kiwi’.
As December Fed rate hike bets increase, so does demand for the safe US Dollar. The US Presidential election is also just over two weeks away, meaning market jitters are only likely to worsen from here on.
Demand for ‘safe haven’ currencies like the US Dollar and Japanese Yen is likely to soar in the final week of the Presidential campaign, as markets look to protect their assets from the election result.
Thursday’s data may also influence GBP/NZD movement however. The Asian session will see the publication of New Zealand’s September trade balance update, while Britain’s highly anticipated Q3 Gross Domestic Product (GDP) results will be posted in the European session.