The Pound New Zealand Dollar exchange rate has a pivotal few days ahead of it, which could affect not just the short-term, but mid to long-term trajectories of the exchange rate. GBP NZD trended narrowly on Tuesday after a Monday fall, trending above the key support level of 1.69.
Pound New Zealand Dollar (GBP NZD) Limp as Article 50 Excitement Wanes
Sterling was easily swept up in the cross flows of global US election-correlated trade on Monday. After the Pound stole the show last week, surging against the New Zealand Dollar and other currencies, it shed over half of these gains on Monday.
In GBP NZD’s case, its Monday limpness allowed the ‘Kiwi’ to push the pair closer to last week’s record-lows once again.
While a little positive market sentiment towards the Pound remains thanks to ongoing hopes that UK Parliament will fight for Britain’s access to the EU single market, this was unable to help Sterling hold its ground on Monday.
Tuesday’s UK stats from the Office for National Statistics (ONS) did little to boost the Pound. Industrial production disappointed economists in September’s print, while manufacturing production beat expectations.
New Zealand Dollar (NZD) Strengthens on Election Bets despite Imminence of RBNZ Rate Cut
Investors have accepted that the Reserve Bank of New Zealand (RBNZ) will cut New Zealand’s overnight rate in its policy meeting this week – but this didn’t stop the ‘Kiwi’ from strengthening on Monday.
After ‘status quo’ US Presidential candidate, Democrat Hillary Clinton, was cleared of suspicion in an FBI investigation of her private email server use on Sunday, bets surged that she would be able to win the White House in Tuesday’s election.
This improved market confidence of market stability following this week’s election results, which in turn increased demand for risk-correlated currencies. While the ‘Kiwi’ was held back by RBNZ rate cut expectations, the NZD GBP exchange rate was still able to benefit from this risk rally.
Pound New Zealand Dollar Mid-Term Forecast: This Week to Alter GBP NZD Trajectory
The next few days will be vital to the short to mid-term movement of the Pound New Zealand Dollar exchange rate. Unsurprisingly, the tone of upcoming risk movement will be set by Tuesday’s US Presidential election.
Traders will react to results as they come on throughout Tuesday night and Wednesday morning. If Clinton wins, demand for risky currencies will remain bullish.
However, if Republican Donald Trump wins, markets will rush to more traditional ‘safe haven’ currencies amid fears of the candidate’s unorthodox protectionist economic and foreign policies.
Either way, the New Zealand Dollar is unlikely to perform strongly on Wednesday. With the Reserve Bank of New Zealand (RBNZ) expected to announce a new rate cut during Thursday’s Asian session, NZD GBP demand will be limited even in the event of a Clinton win.
As a result, GBP NZD has a solid chance to advance by the end of the week – but in the event of a Clinton win it’s likely GBP NZD will hit further record-lows in the coming month until NZD is weakened by bets of a Federal Reserve interest rate hike.
A Trump win, on the other hand, would allow GBP NZD to soar in the coming month as the ‘Kiwi’ takes the brunt of New Zealand’s rate cut and market-wide risk aversion patterns.
At the time of writing, the Pound New Zealand Dollar exchange rate traded at around 1.69, while the New Zealand Dollar Pound exchange rate trended in the region of 0.59.
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