Other data releases last week provided some encouraging signs for the Kiwi Dollar, with Thursday’s New Zealand Trade Balance figure for December significantly bettering expectations.
Foreign Currency Market Update – GBP / NZD Update
Last week’s session ended with the New Zealand Dollar bullying the Pound, sending GBP NZD to a new four month low of 1.9026. The pair has since moved away from this level, to briefly break 1.9200 during today’s session, suggesting that 1.9000 is acting as an interim psychological floor. The GBP NZD rate has spent the last two weeks range-trading between resistance at 1.9400 and Friday’s low of 1.9026. Prior to this, the pair was in a strong downtrend for a month, taking it from 2.0712 as recently as 15th December, all the way down to 1.9210 on January 11th. The tight trading range of the past two weeks could prove to be a ‘pause for breath’ before the pair heads lower.
The Reserve Bank of New Zealand opted to maintain its key lending rate at 2.50% last Wednesday, as per analysts’ expectations. This means that New Zealand’s interest rates remain some 2.00% higher than the current Bank of England base rate, confirming NZ as a relatively attractive destination for inward investment. Other data releases last week provided some encouraging signs for the Kiwi Dollar, with Thursday’s New Zealand Trade Balance figure for December significantly bettering expectations to print at NZ$338m and Wednesday’s Business NZ Performance of Manufacturing Index suggesting that domestic manufacturing output is once again on the up. On the other side of the coin, last week’s UK data releases disappointed – the minutes of January’s Bank of England Monetary Policy Committee meeting showed that several members are advocating further quantitative easing in order to grease the wheels of the ailing British economy. UK GDP growth data, released at the same time as the minutes, showed that British economic activity contracted by 0.2% in the three months to the end of December 2011, suggesting that the UK economy could once more be tumbling towards recession.
*Denotes the importance of the data item *** being the highest level.
** The latest GfK Consumer Confidence survey is released in the early hours of Tuesday morning. An improvement from December’s figure of -33 is expected.
** Tuesday morning sees the release of UK Mortgage Approval data for December.
** Wednesday, Thursday and Friday bring the release of the latest Purchasing Managers’ Index surveys for the UK’s Manufacturing, Construction and Services sectors respectively. The Services edition will be the most closely-watched.
* Various tier 3 releases are penned in for this week in New Zealand; tonight’s NZ Building Permits numbers and Thursday night’s Net Migration figures providing the highlights. Neither will be market-moving.
This week’s session has begun with institutional investors shunning risk and moving into assets with a higher safety tariff. This has seen global stock markets registering losses and has caused the New Zealand Dollar to lose ground against the majority of the other sixteen most-actively traded currencies. Market jitters have been triggered by the continued failure of Greek creditors to agree a debt deal with the country’s government. If this policy void continues, then full on risk aversion could take hold, leading to a move back above the key 2.00 level for GBP NZD. Alternatively, a rapid resolution to Greece’s debt woes could spark the return of a ‘risk-on’ trading environment, sending stock markets higher and strengthening the NZD. Such a scenario would send GBP NZD downwards, bringing last August’s multi-year low of 1.8546 into view.
- Pound to New Zealand Dollar Forecast – The GBP NZD rate has held above last Wednesday’s near-term low of 1.9041
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