Foreign Exchange Report : GBP NZD Rate Spikes Upwards as Secondary Earthquakes Hit Christchurch. GBP AUD and GBP ZAR Rates Could Follow Suit

Published: Monday, 13 June 2011 06:30 BST - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP NZD Rate Spikes Upwards as Secondary Earthquakes Hit Christchurch. GBP AUD and GBP ZAR Rates Could Follow Suit

The Pound New Zealand Dollar exchange rate (GBP NZD) is 1.9969. The Pound Euro exchange rate (GBP EUR) is 1.1315. The Pound Dollar exchange rate (GBP USD) is 1.6224.

In a major development, two serious earthquakes have hit the Canterbury region of New Zealand overnight. Official sources suggest that the first struck about 10km from Christchurch city centre and was of a magnitude 5.2, while a second, stronger shock, of magnitude 6.0 hit the city itself eighty minutes later.

The New Zealand Dollar had been enjoying a strong bull-run since mid-March thanks to some solid economic data releases and following comments from RBNZ Governor Alan Bollard in the middle part of last week which suggested that the re-building of Christchurch following the massive earthquake of early March would add 2% to New Zealand’s GDP in 2012, the Kiwi strengthened to recent record-high levels against the Pound. This saw the GBP NZD exchange rate drop to a multi-year low of 1.9671 during Friday’s session.

However, the GBP NZD rate picked up by over two cents in the space of two hours, touching off NZD2.00 to the Pound, following last night’s aftershocks in Canterbury. It is likely that further downside is possible during today’s session as institutional investors factor-in the news.

Elsewhere, the Pound received a timely boost on Friday afternoon with the release of May’s NIESR UK GDP figure, which estimated that the UK economy expanded by 0.4% last month. Although the NIESR is an independent statistical body, so this can not be viewed as an official figure, these estimates often prove to be accurate and the NIESR‘s predictions are widely respected.

If the official ONS GDP growth data, due for release in the next few weeks, shows a similar move forward in UK economic activity , then the markets may upwardly adjust their expectations for a Bank of England interest rate hike.

Meanwhile, last night’s Asian session saw the release of highly disappointing Japanese Machine Orders data. The figures, which provide a leading indication of the strength of Japan’s key manufacturing base, showed that plant orders contracted by a monthly 3.3% in April versus analysts’ expectations of growth of 1.7%. Economists have concluded from these numbers that Japan’s recovery following March’s tsunami continues to be hampered by power shortages and supply chain difficulties.

Following last week’s poor Japanese GDP, Trade Balance and Consumer Confidence figures, it is likely that the overnight Japanese Machine Order figures will weigh heavily on risk appetite in the markets at the start of this week’s session, particularly as Friday saw a negative day for global equities indicies, with both the FTSE 100 and S&P 500 closing down by over 1.5%. This could see the GBP AUD and GBP ZAR rates move upward and may cause the GBP USD and GBP CHF rates drop further.




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