Pound to New Zealand Dollar Exchange Rate Forecast: The GBP NZD exchange rate remains firmly locked in the downtrend

Currency

By on June 13th, 2012.
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The GBP NZD exchange rate remains firmly locked in the downtrendThis week’s key risk event for GBP NZD comes tonight, when the Reserve Bank of New Zealand announces its latest interest rate decision.

Foreign Currency Market Update – GBP / NZD Update

The GBP NZD exchange rate remains firmly locked in the downtrend which it has been stuck in since 23rd May when it broke to a 13½ month high at 2.1056. The pair had ample opportunity to stage a mini-revival over the past five sessions, thanks to last Thursday’s announcement by the Bank of England that it would not be extending its £325bn Quantitative Easing programme and Friday’s market rumours surrounding an imminent collapse of Spain’s banking sector. Ordinarily, these two occurrences would send the GBP NZD rate higher – in reality, the pair reacted to the two risk events by sinking to its lowest level for five weeks at 1.9929 shortly after the currency markets re-opened for business on Sunday night.

In truth, the fact that GBP NZD opened at a level over a cent below the rate which it had closed at on Friday night was due to a keynote announcement by the eurozone’s Finance Ministers on Saturday, which revealed that they would be making up to €100bn of emergency funding available to Spain’s debt-burdened banks. This triggered an instant uptick in global appetite for risk, which saw world stock markets and the Kiwi Dollar register healthy gains. However, the forward move for GBP NZD proved short-lived and with the interest rates which both Spain and Italy are paying on their benchmark 10-year government bonds rising perilously close to 7% during today’s session, further near-term downside for the New Zealand Dollar can not be ruled out.

This week’s key risk event for GBP NZD comes tonight, when the Reserve Bank of New Zealand announces its latest interest rate decision. Analysts expect the Bank to maintain New Zealand’s key lending rate at its current level of 2.50%, however a surprise cut is not out of the question due to the relatively soft tone of recent Chinese and New Zealand data releases. If the RBNZ does maintain the status quo, then expect the selling pressure on GBP NZD to continue, with consecutive closes below Sunday night’s five week low of 1.9929 providing strong confirmation of the trend downwards.

Heads Up

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

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