Pound to New Zealand Dollar Exchange Rate Forecast: Sterling has been on the slide against the Kiwi Dollar

Currency

By on June 25th, 2012.
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Sterling has been on the slide against the Kiwi DollarSterling has been on the slide against the Kiwi Dollar.

Foreign Currency Market Update – GBP / NZD Update

Sterling has been on the slide against the Kiwi Dollar since 23rd May, when the GBP NZD exchange rate broke to its 14 ½ month high of 2.1056. In truth, the pair appeared overbought at this level, so the sharp break back below the 2.00:1.00 level has not come as a major surprise. The downside move continued during the first four sessions of last week, taking GBP NZD to its lowest level for over two months during last Thursday’s session. The continued downtrend for the GBP NZD rate was driven by fundamentals, with Tuesday’s lower-than-anticipated CPI inflation figures in the UK causing market participants to factor-in a higher likelihood of further loosening of British monetary policy in coming months. This line of thinking was strengthened by Wednesday morning’s Bank of England minutes, which revealed that four of the Bank’s nine-man policy committee had voted in favour of an expansion of the £325bn already allocated to the UK’s asset purchase programme. Further QE for the UK looks a shoe-in for July’s meeting, a fact which will weigh heavily on the Pound in coming weeks.

Meanwhile, the New Zealand economy continued to outperform expectations, as illustrated by Wednesday night’s GDP growth data for the three months to the end of March. The figures showed a healthy quarterly expansion of 1.1% in the Kiwi economy during this period, way ahead of the 0.4% increase which analysts had expected. Support for the NZD coupled with a weakening of the Pound took GBP NZD all the way down to 1.9603 in the early hours of Thursday morning. This was the pair’s lowest level for over two months. However, Thursday morning’s European session brought a sharp move higher for Sterling, after the release of stronger than expected UK retail sales data for May, which convincingly beat investors’ expectations. The forward move for GBP NZD has carried into this week’s session, as investors ‘ appetite for risk diminishes thanks to concerns about a potentially fractious eurozone summit later this week. The return of risk aversion has hit the Kiwi Dollar harder than most, sending the GBP NZD exchange rate back into the 1.98s this afternoon.

Despite the slight improvement of the past three sessions, it’s far too early to state that GBP NZD has ‘turned a corner’ and is on the way back up. A downtrend has been in place since the 23rd May for the pair and this is more likely to continue in the short-to-medium term than to be arrested.

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Summary of major upcoming data releases that we think may move the market.

 

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