- Turbulent times for the New Zealand Dollar
- Guidance for NZD buyers and sellers
There are several sources of potential volatility for the GBP-NZD currency pairing.
A strong Pound, thanks to the latest Bank of England revelations, is at close to a 12-month high against the New Zealand Dollar.
Political uncertainty is weighing on the NZD in the run up to the elections on 23rd September. Currency markets don’t like uncertainty, and the predicted tight election result is making markets nervous. Market experts predict that there could be a further downside for the New Zealand Dollar in the run up to and post-election.
Potential changes at the Reserve Bank of New Zealand (RBNZ) decision-making and rate approach following the election result could also have the potential to weaken the New Zealand Dollar. Having cut interest rates no less than seven times from 2015-2016, it is now looking increasingly like the RBNZ could start to wind down this aggressive economic stimulus.
The New Zealand economy is essentially in full employment currently – this could make a case for interest rates to be raised, even if inflation has not fully reached desired levels. Any changes to immigration from a new political regime may affect this.
In terms of economic data, the latest New Zealand Business Manufacturing Index rose to 57.9 in August. New Zealand is directly affected by Chinese economic performance because of their close trading ties, given their key trading relationships, so there could also be some volatility ahead from Chinese data releases.
With global currency markets particularly volatile right now, there is certainly potential for the New Zealand Dollar to continue to lose strength.
Guidance for GBP-NZD buyers
This currency pair is currently oversold, so we could see pullback in the next few days. The current trading range is 1.82 to 1.87, with a potential 1.8980 target on the topside, so buyers may wish to trade a portion now and then target 1.88 on a market order on the rest.
Guidance for GBP-NZD sellers
A sensible target in the current market would seem to be around the 1.83 mark.
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