Pound Sterling Soars against NZD after BoE News

May 11, 2016 - Written by John Cameron

STORY LINK Pound Sterling Soars against NZD after BoE News

The Pound has fared well against the 'Kiwi' and others today, thanks to the Bank of England (BoE) not indicating that interest rate cuts are on the way.

The day's UK domestic data has softened the Pound considerably today, owing to industrial and manufacturing production results both falling.

'Panama Papers' Scandal boost GBP/NZD Exchange Rates

News from the Pacific captured the attention of currency market participants during yesterday’s session; the developments triggered movement for the Pound Sterling (currency : GBP) against more than one of the other most actively traded global currencies.

The revelation that New Zealand is heavily implicated in international tax avoidance, as evidenced by the recent large-scale leak of information from the Mossack Fonseca law firm in Panama, weighed down the New Zealand Dollar (currency : NZD) on the day.

The upshot saw the Pound Kiwi Dollar exchange rate edge up towards the 2.1500 GBP NZD threshold during the European afternoon session.

New Zealand’s Prime Minister assured his population that it was ‘utterly incorrect’ to label their nation a tax haven, but did go on to concede that, ‘if there's any need for change in this area, the government will consider it and if necessary, take action.’ International investors scrambled to shift their funds out of Kiwi-denominated assets as a consequence - a break back above the 2.2000 GBP NZD level would now appear possible for the Sterling to Kiwi exchange rate.

Tensions Mount between US and China over Disputed Reef in the South China Sea

Elsewhere, tensions between the world’s two premier economic superpowers ratcheted up yesterday when US Navy warship the USS William P. Lawrence sailed to within a few miles of a disputed reef in the South China Sea. Chinese dredging ships were spotted on the periphery of the reef in the lead-up to the event – a move considered incendiary by US authorities who fear a land-grab of the strategically significant islands by Beijing.

US Defense Department spokesman Bill Urban commented following the incident that China’s, ‘excessive maritime claims are inconsistent with international law as reflected in the Law of the Sea Convention in that they purport to restrict the navigation rights that the United States and all states are entitled to exercise.’

Concerns regarding a deterioration of Sino-US relations took the edge off global risk appetite as the day progressed, sending share markets lower. If this flight to safety gains momentum today, then expect the safe-haven US Dollar (currency : GBP), Swiss Franc (currency : CHF) and Japanese Yen (currency : JPY) to enjoy sustained support.

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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts Poun Forecasts