The five week uptrend for GBP NZD which culminated in a 13-month high of 2.1056 on 23rd May, now looks to have run out of momentum, hinting that the pair was ‘over-bought’ at rates above the 2.1000 level.
Foreign Currency Market Update – GBP / NZD Update
A light schedule of domestic data releases during last week’s session failed to hold back the New Zealand Dollar, which pushed ahead against a seemingly weary Pound. This saw the GBP NZD exchange rate edge steadily downwards, to drop to its lowest level for a month at 2.0251 during yesterday’s session.
Sterling continued to struggle for support last week, following a poor run of data in the latter part of last month which included alarmingly weak UK Retail Sales numbers, lower than expected British inflation figures and a downgrading of domestic Q1 GDP growth numbers. With little in the way of positive UK data to replace these negative releases in the minds of institutional investors in the meantime, the Pound remained well and truly weighed-down.
The five week uptrend for GBP NZD which culminated in a 13-month high of 2.1056 on 23rd May, now looks to have run out of momentum, hinting that the pair was ‘over-bought’ at rates above the 2.1000 level. The fact that GBP NZD continues to head lower, in spite of an escalation of concerns over the state of the global economy, suggests that technical factors are at play in the market. Ordinarily, fears over the eurozone’s potentially catastrophic debt crisis, which have seen the yields on Spain’s benchmark 10-year bonds spiral to close to 7% over the past seven days, would cause investors to move against the risk-sensitive New Zealand Dollar. With the opposite happening, the possibility now exists that GBP NZD could retrace back towards its 10-week low of 1.9170, which may provide a key interim level of support. If the pair closes below this level for two consecutive sessions, then it may start eyeing its 10-month low of 1.8634. Conversely, with the potential for an escalation of the eurozone’s debt crisis ever-present in the background, and with increasingly weak data coming out of the giant US economy, the possibility of a sharp move against the Kiwi Dollar remains. Such a scenario could take GBP NZD back up towards its yearly high at 2.1056.
Summary of major upcoming data releases that we think may move the market.
- Price action for GBP NZD during last week’s session was dictated by two data releases on opposite sides of the world
- Pound Sterling to New Zealand Dollar Foreign Currency Exchange Rate Forecast – Sterling give back recent gains
- Pound to New Zealand Dollar Exchange Rate Forecast: Last week’s session proved to be a highly significant one for the GBP NZD exchange rate
- Weaker than anticipated New Zealand labour market figures, released in the middle part of last week’s session, caused pronounced selling pressure on the Kiwi Dollar.
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Kiwi surges 8% in four weeks