Market Update – GBP / NZD
Since our last update, in which we voiced a cautiously optimistic tone for sterling, things have continued to improve. The pound rebounded strongly ahead of the October lows, helped in part by hawkish comments from Bank of England policy maker Andrew Sentance, prompting markets to start bringing forward expectations of a possible interest rate hike in the UK. Sterling’s tailwind has been bolstered by talk of a +0.4% figure for fourth quarter GDP, but the figure came in at just 0.1% this morning, confirming that the country pulled out of recession at the end of 2009, but only by the finest of margins. Sterling has lost a cent on the news as disappointment sweeps the market.
The Kiwi dollar has been on the back foot this week on reports that China’s central bank will raise reserve ratios for several key lenders, effectively tightening monetary policy by reducing lending and raising the interest rates required by lenders. Also weighing on sentiment toward the high yielders is the dramatic stock market sell off seen over the last few days. If that trend continues and develops into panic, we could see severe weakness in currencies like AUD, NZD and the Rand. Buyers of these currencies should therefore be on alert for opportunities.
The technical outlook is building in favour of sterling. We still have short term positive momentum backing the pound, but there is a major technical resistance level at 2.33. A break above there would be a very significant boost for sterling. Buyers of the New Zealand dollar hoping for a continued improvement should strongly consider placing a stop order to protect against a renewed slide. This is especially relevant given the recent rally.
Any opinions expressed in this document are those of TorFX
analysts. Any analysis and/or forecasts provided are aimed at
helping clients understand market conditions and developing trends.
Clients are wholly responsible for their own trading
decisions.
Related posts:
- New Zealand Dollar Update – The Kiwi is looking firm
- The Pound bounces back against the majors amid suggestions that last week’s decline was ‘overdone’
- The New Zealand dollar has been capitalising on Sterling’s weakness
- FX106 Foreign Exchange – New Zealand Dollar Update
- TorFX – New Zealand Dollar Outlook
