Pound to New Zeland Dollar Exchange Rate (GBP/NZD) Could Fall Ahead Of Renewed Run

Modified: Monday, 22 July 2013 20:45 BST - Written by John Cameron

STORY LINK Pound to New Zeland Dollar Exchange Rate (GBP/NZD) Could Fall Ahead Of Renewed Run

The US Dollar was the big loser in the currency markets during yesterday’s session. A pronounced weakening in the value of the Greenback throughout the day sent the Pound to US Dollar exchange rate (currency : GBP USD) from the mid-1.5200s where it loitered during early trading up to close to 1.5400 by the European equities close.

The move against the Buck was triggered by Sunday’s Japanese election result which saw current Japanese Premier Shinzo Abe secure control of Japan’s upper house giving him carte blanch to continue with his ultra-loose monetary policy. Recent comments from the Bank of Japan suggested that the days of ‘easy money’ might be nearing an end in Asia, making it more difficult for the US Federal Reserve to justify the continuance of its $1tn + per annum asset purchase scheme. However, if Japan is going to continue with its ‘abenomics’ policy, which has seen a similar pumping of hundreds of billions of Dollars worth of Yen pumped into the global credit markets, then US policymakers will feel that it is A-OK to keep up with the Fed’s QE policy.

Today brings another relatively quiet session for global data releases. The highlight comes late this evening in the form of the latest New Zealand Trade Balance figures. The numbers are expected to show that the Antipodean nation’s trade surplus expanded from NZD71m in May up to NZD105m last month. The figure, if it prints as per analysts’ expectations, is likely to provide the Kiwi Dollar with a short-lived bout of support ahead of tomorrow night’s Reserve Bank of New Zealand (RBNZ) policy decision. It would be a surprise if the RBNZ did not make mention of the historically strong New Zealand Dollar hurting domestic industries. The potential also remains that New Zealand’s central bank will suggest that the way to counter this is to once again dump hundreds of millions of NZD worth of assets on the market in an effort to actively weaken the local unit. Such an action could readily send the GBP NZD exchange rate back up towards the two to one threshold.

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