Weak New Zealand Trade figures for March, released last night, have seen the Kiwi start this week on the back foot once again.
Foreign Currency Market Update – GBP / NZD Update
Price action for GBP NZD during last week’s session was dictated by two data releases on opposite sides of the world. Wednesday evening saw the Reserve Bank of New Zealand opt to maintain its key interest rate at 2.50%, as per analysts’ expectations. The announcement saw a brief rally for the Kiwi Dollar, suggesting that some investors had been pricing-in a surprise loosening of monetary policy by the RBNZ. After the announcement, Alan Bollard, the Governor of New Zealand’s central bank, declared that he expected domestic inflation to remain within its target range in the near-term, giving the RBNZ the option for further cuts to interest rates later in the year. Bollard went on to comment that he remained concerned over the ongoing strength of the global economic recovery and the effect that a world-wide downturn might have on the export-dependent New Zealand economy. Bollard’s words led analysts to trim their future expectations for NZ interest rates in the short-to-medium term, causing the Kiwi Dollar to lose ground.
The GBP NZD exchange rate had come under sustained selling pressure earlier in the day, with the release of provisional Q1 GDP data in the UK, which revealed that British economic activity had contracted for the second quarter in succession, meaning that the UK had once again entered a technical recession. The announcement came as a surprise to investors, causing GBP NZD to tumble from above 1.9900 at the start of Wednesday’s European session to trade back in the mid-1.9700s by mid morning the same day.
In the end, the negative effect that the news of a British ‘double-dip’ recession, was more than cancelled out by the Kiwi-negative tone of the Reserve Bank of New Zealand’s commentary. This saw GBP NZD strengthen towards the end of the week, taking the pair to 1.9951 during Friday’s session, its highest level since 2nd January.
Weak New Zealand Trade figures for March, released last night, have seen the Kiwi start this week on the back foot once again. If the NZD continues to trend weaker, then GBP NZD may make a concerted run at the 2.0000 to 1 level sooner rather than later. However, a forward move for global stocks would trigger renewed support for the New Zealand Dollar, threatening a downside move towards the key interim floor of 1.9170, which the pair last reached in the middle part of this month.
Summary of major upcoming data releases that we think may move the market.
- The GBP NZD exchange rate jumped to 1.9673 during last week’s session
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