Written by John Cameron on February 20th, 2012
The pair convincingly broke down through February 3rd’s 6-month low of 1.8851 and traded to within a whisker of last August’s multi-year low of 1.8546.
Foreign Currency Market Update – GBP / NZD Update
Sterling has once again struggled to assert itself against the New Zealand Dollar over the last seven days, seeing the GBP NZD exchange rate drop to 1.8634 on Wednesday – its lowest level since the middle of last Summer. The Pound staged a mini-revival in the latter half of the week to briefly trade back above the 1.9000 level, however, the GBP NZD exchange rate started this week’s session back in the low 1.89s when global currency markets re-opened on Sunday night.
The most significant New Zealand data release last week came in the form of Tuesday’s Quarterly Retail Sales numbers, which showed at 2.2% – markedly higher than the 1.2% analysts had been anticipating. Monthly UK Retail Sales figures for January were released on Friday; these also beat expectations, registering at a higher than expected level of 1.9%, cancelling out the positive effect that the NZ shop sales numbers had had on the Kiwi Dollar. Meanwhile, the most closely-monitored British data releases of the week served to add to selling pressure on the Pound, with Tuesday’s UK CPI Inflation numbers showing an annualised drop in the rate of British price rises from 4.2% in December to 3.2% last month. UK Unemployment figures released on Wednesday showed that there had been more than twice the expected 3,000 new claimants in unemployment benefit last month. Given these numbers, there seems little possibility that the Bank of England will have the scope raise interest rates from their current record low of 0.50% for the remainder of the year.
*Denotes the importance of the data item *** being the highest level.
** Tuesday morning sees the release of January’s UK Public Sector Borrowing figures – they are expected to show that the British government managed to pay off £6.3bn of its debt last month – a lower number than this could hurt Sterling.
*** Wednesday morning’s release by the Bank of England of the minutes of its February MPC meeting will be closely-monitored by analysts for clues on the future direction of British monetary policy.
*** Friday morning sees the release of the official Q4 GDP figures for the UK economy – a quarterly contraction of 0.2% is expected. Anything worse than this could spark a Sterling sell-off.
*** The Reserve Bank of New Zealand issues its 1-2 Year Inflation outlook in the early hours of Tuesday morning.
** New Zealand Credit Card spending data for January is released on Wednesday
Last week’s session was another negative one for the GBP NZD exchange rate. The pair convincingly broke down through February 3rd’s 6-month low of 1.8851 and traded to within a whisker of last August’s multi-year low of 1.8546. The fact that this significant interim floor was not broken gave some hope to clients needing to buy New Zealand Dollars in the near-term, however the major trend for the pair remains strongly to the downside. With global share markets starting this week on the front foot in anticipation of Greece’s bail-out package being rubber-stamped later today, a move lower looks highly possible sooner rather than later for GBP NZD.
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