April 19, 2021 - Written by Tim Boyer
STORY LINK GBP/NZD Forecast: Pound to New Zealand Dollar Exchange Rate Struggles to Recover as ‘Kiwi’ Remains Strong
Investors attempted to buy the British Pound to New Zealand Dollar (GBP/NZD) exchange rate back from monthly lows towards the end of last week, but Sterling is struggling to sustain a bigger advance as the New Zealand Dollar remains appealing as well. While this week’s New Zealand economic calendar will be fairly quiet, analysts expect that there are still many reasons for investors to buy the ‘Kiwi’.
After opening last week at the level of 1.9493, GBP/NZD attempted to climb before spending most of the week plunging. Towards the end of last week, GBP/NZD touched on a low of 1.9183. This was the worst level for GBP/NZD in around a month and a half, since the beginning of March.
GBP/NZD then saw a strong rebound and ultimately closed the week higher, in the region of 1.9387.
Since markets opened this week though, the New Zealand Dollar is again attempting to advance. At the time of writing on Monday, GBP/NZD is trending in the region of 1.9320.
Pound Sterling (GBP) Exchange Rates Lack Drive but Likely to Remain Appealing
The Pound has been less appealing in recent weeks. Investors have been selling the Pound from its recent highs due to a mixture of profit-taking selloff, as well as a lack of fresh upside developments in UK news.
As the New Zealand Dollar is more appealing amid rising market sentiment, it is benefitting from mixed appetite for the Pound and is pushing GBP/NZD lower.
Despite a lack of fresh support for the Pound this week, the British currency is strengthening against some major rivals.
This is because investors remain optimistic overall about the Pound’s outlook, and how it correlates to rising optimism that Britain’s economy will likely continue to gather momentum as it continues its gradual recovery from the coronavirus pandemic.
According to Chris Turner, Global Head of Markets at ING, investors continue to find the Pound outlook appealing enough to keep buying the British currency and not let it fall too far:
‘GBP continues to find support on dips and it seems like investors are happy enough staying positioned for the 2Q UK re-opening story,
Today we have already seen some encouraging April Rightmove house price data,’
New Zealand Dollar (NZD) Exchange Rate Outlook Optimistic Despite Lack of Fresh Support
Similarly to the Pound, the New Zealand Dollar continues to see broad support in currency markets. Investors are optimistic about New Zealand’s coronavirus situation, economic activity and potential to recover from the pandemic.
Despite some concerns about New Zealand’s housing bubble situation, other aspects of New Zealand’s economic outlook remain strong and continue to support the New Zealand Dollar.
As the New Zealand Dollar is a currency often correlated to market risk and trade sentiment, it has also benefitted from the more optimistic market mood in recent weeks.
All this combined with hopes that New Zealand will soon allow travel with a select few other nations as restrictions continue to lighten, are keeping the ‘Kiwi’ appealing.
According to Strategists at UBS:
‘We're inclined to go outright long NZD,
Some of that is anticipation of a weaker USD backdrop, but the bulk is how much the kiwi has cheapened in Q1. The launch of the Trans-Tasman travel bubble also asymmetrically helps NZD even though it's still tourist low season.’
Overall, optimism about New Zealand’s outlook and higher market sentiment are helping the New Zealand Dollar to hold near its recent highs against a more volatile Pound.
GBP/NZD Exchange Rate Forecast: Slew of UK Data Expected This Week
The coming week will see the publication of a slew of typically influential UK ecostats. Amid mixed demand for the Pound lately, this could cause a more solid shift in direction for Sterling.
Demand for the New Zealand Dollar could be influenced by New Zealand inflation rate data, due during Wednesday’s Asian session. Stronger than expected inflation could boost hopes for a more hawkish Reserve Bank of New Zealand (RBNZ)
However, failing that the New Zealand Dollar’s movement will be more driven by shifts in the coronavirus pandemic and overall market sentiment.
UK data to keep an eye out for includes job market data due tomorrow, inflation data on Wednesday, and retail and PMI stats towards the end of the week.
Sterling’s outlook remains strong overall. As a result, if Britain’s upcoming data is even stronger than expected it could mean new gains for the Pound to New Zealand Dollar exchange rate as well.
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TAGS: Pound New Zealand Dollar Forecasts