The Kiwi Dollar had fared reasonably well against the Pound last week, with a combination of stronger than expected New Zealand Q2 GDP data and a sterling-negative Bank of England minutes, both released on Wednesday, sending GBP NZD down into the low 1.95s.
Foreign Currency Market Update – GBP / NZD Update
As this week’s session gets underway, the New Zealand Dollar has come under a heavy and sustained bout of selling pressure. The GBP NZD exchange rate started last night’s Asian session trading at 1.9579, but by the middle part of today’s European equities session, the pair was trading as high as 1.9794. As is so often the case, the move against the New Zealand Dollar has not been driven by domestic data releases, but instead by a generalised shift out of risk-laden, commodity-driven currencies including the NZD.
The flight to safety by institutional investors has been fuelled by several different risk events across the globe. The ongoing stand-off between Japan and China regarding the sovereignty of the Senkaku Islands in the South China Sea sparked violent protests across China last week. Perhaps more worryingly, Japan’s Prime Minister Yoshihiko Noda spoke out over the weekend, suggesting that China’s behaviour would cause her trading partners to introduce sanctions against the Asian giant. This is the last thing that the key region needs, especially given that recent trade figures suggest that economic activity in Asia as a whole is beginning to cool.
Elsewhere, Spanish Prime Minister’s suggestion over the weekend that it might not be in his country’s best interests to accept bail-out funding from the EU/IMF/ECB, has led investors to surmise that Spain might be at risk of a fully blown debt default, heightening the move out of risk-sensitive currencies including the New Zealand Dollar. The mood of gloom was added to by this morning’s German IFO Business Climate survey, which revealed that confidence amongst the German business community has contracted for the fifth month on the trot.
The Kiwi Dollar had fared reasonably well against the Pound last week, with a combination of stronger than expected New Zealand Q2 GDP data and a sterling-negative Bank of England minutes, both released on Wednesday, sending GBP NZD down into the low 1.95s. However, if global events continue to maintain the current ‘risk-off’ trading environment, then the pair could make a renewed run at its 14-week high of 2.0071, which it last visited earlier in the month.
Summary of major upcoming data releases that we think may move the market.
- The Pound has been under heavy selling pressure against the Rand
- The South African Rand came under sustained selling pressure
- Weaker than anticipated New Zealand labour market figures, released in the middle part of last week’s session, caused pronounced selling pressure on the Kiwi Dollar.
- The Pound continued to decline against the Euro and also came under renewed selling pressure versus the U.S Dollar yesterday
- The Pound rallied for the second consecutive day against the Euro exchange rate while the Dollar came under renewed selling pressure