Could GBP AUD & GBP NZD Exchange Rates Spike on ?Black Swan? Event?

September 20, 2016 - Written by Ben Hughes

STORY LINK Could GBP AUD & GBP NZD Exchange Rates Spike on ?Black Swan? Event?

Pound Sterling to Australian Dollar, New Zealand Dollar Exchange Rate Forecast: Black Swan Event Ahead?

The Pound to Australian Dollar (GBP AUD) exchange rate fell 0.4% on Monday while the Pound New Zealand Dollar (GBP NZD) exchange rate also declined - but is a recovery ahead?

By definition, you don’t see a ‘Black Swan Event’ until it is upon you; however, analysts were quick to spot the next potential threat to the global financial system following a recent report from the Bank for International Settlements (BIS).

The BIS issued a stark warning about the levels of indebtedness in China’s vast economy in its Quarterly Review, published over the weekend. The widely-respected authority noted that the total amount of combined debt held by households, business and the government had rocketed to 255% of China’s Gross Domestic Product in 2015. This represented a significant increase from 220% during 2013 and led the BIS to warn of a heightened potential of a full-blown banking crisis in the world’s second most developed economy. The BIS went on to note that the total aggregated amount of outstanding Chinese loans, at the latest count, tipped the scales at a heady $28 trillion.

GBP to AUD, NZD Exchange Rates Supported by UK House Price Data

Declines in the Pound Sterling to Australian Dollar (GBP AUD) and Pound Sterling to New Zealand Dollar (GBP NZD) exchange rates weren't as severe as they might have been on Monday as GBP garnered support from the UK's latest house price figures.

However, the missive from the BIS built on a theme raised by an unnamed, but ‘very authoritative figure’ in China, as reported by the nation’s ‘People’s Daily’ newspaper, earlier in 2016. The senior spokesman noted that China’s debt burden is, ‘growing like a tree in the air’. This simile suggests an impending fall for the Chinese economy, possibly followed by a 2007-09 style credit contraction which could potentially bring the global economy to its knees.

Claudio Borio of the BIS noted in the text which accompanied the report that the sharp increase in asset prices across the board may be about to move into reverse. Borio noted that, ‘there has been a distinctly mixed feel to the recent rally – more stick than carrot, more push than pull, more frustration than joy. This explains the nagging question of whether market prices fully reflect the risks ahead.’

Borio went on to observe that,

“The apparent dissonance between record low bond yields, and sharply higher stock prices with subdued volatility cast a pall over such valuations. Banks’ depressed equity prices and budding signs of tension in bank funding markets added another sobering note.’

GBP AUD, GBP NZD Exchange Rates Forecast to Jump Higher?

If the BIS is proved to be well-founded in its fears, then analysts forecast that the Pound Sterling (currency : GBP) may spike in value against the high-yielding Commodity Dollars, sending the GBP AUD, GBP NZD and GBP CAD exchange rates sharply higher.

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