Last week’s session brought pronounced fluctuations for the GBP NZD exchange rate


By on October 22nd, 2012.
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Last week's session brought pronounced fluctuations for the GBP NZD exchange rate.

Foreign Currency Market Update – GBP / NZD Update

Last week’s session brought pronounced fluctuations for the GBP NZD exchange rate. The pair was trading close to 1.9600 late last Monday afternoon, however before the end of Tuesday’s European equities session, it had reached its highest level for 6 weeks, touching 1.9850 as ongoing fears regarding a slowdown in China’s economy continued to hamper the ‘Kiwi’s’ progress. The forward move for GBP NZD proved short-lived, with Wednesday morning’s Bank of England minutes revealing that the Bank’s nine-man policy committee seriously considered extending the UK’s Quantitative Easing programme at their October meeting.

As the week’s session drew to a close, the GBP NZD exchange rate stabilised once more, as the New Zealand tender came under renewed selling pressure thanks to another damp squib of a eurozone leader’s summit and the release of Q3 Chinese GDP growth data. The New Zealand economy is dependent on buoyant demand from its export markets in order to continue growing, so the Chinese data which revealed that economic activity in Asia’s premier economy had dipped in the three months to the end of September, and the passing of yet another European debt summit which failed to yield a tangible solution to the region’s long-standing debt crisis, spelled bad news for the ‘Kiwi’.

Risk has remained firmly off the menu at the start of this week’s session, causing the GBP NZD exchange rate to test higher on more than one occasion already. The key risk event of the week comes in the form of Wednesday evening’s Reserve Bank of New Zealand policy decision. It would be a monumental surprise if the RBNZ elected to alter interest rates from their current level of 2.50%, where they have been since the Spring of 2011. However, if the Bank’s accompanying commentary raises investors’ fear levels by alluding to a Chinese slowdown and generalised weaker demand for the nation’s exports, then there could be further near-term upside to come for the pair. If such a scenario transpires, then any move higher for GBP NZD may prove ephemeral, if Thursday morning’s UK GDP growth data for Q3 prints at below analysts’ expectations.

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