by Jon Beddell
Foreign Currency Market Update – GBP / NZD Update
After gaining over 7% in mid May Sterling is once again on the back foot against the Kiwi as a rebound in global stock markets prompt investors to buy higher yielding / higher risk assets. This improvement in risk appetite benefits currencies like NZD and AUD, while lower yielding currencies like Sterling and the US dollar suffer. While the Pound has been able to maintain its upper hand over the bedraggled Euro and the US dollar (which tends to sag as investors move money towards the high yielders) it is no match for the Kiwi, which stands to benefit both from the stock market bounce and from strong commodity prices. There wasn’t much on the data front to help. The UK’s trade deficit widened in April, and industrial production fell 0.4%. The Bank of England kept interest rates at record lows and are expected to keep them there for the rest of 2010.
Clients with Kiwi currency requirements should consider covering any exposure now. If risk appetite continues to improve the exchange rate could reach new lows before long. The path of least resistance is clearly down.
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