New Zealand dollar to pound sterling exchange rate outlook: GBP/NZD back above 2.0 as NZD caught in EM crossfire
- Written by: Gary Howes
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The New Zealand dollar is under renewed pressure after data out of China continues to weigh on sentiment towards the NZD and other emerging market currencies but the outlook continues to suggest a firm NZ dollar.
It seems the NZ dollar has been caught in the emerging market crossfire, dealt with here. However, it is not an all-out rout for the NZD as the below foreign exchange rates show:
- The pound sterling to New Zealand dollar exchange rate (GBP/NZD) is 0.15 pct higher at 2.0106.
- The euro to New Zealand dollar exchange rate (EUR/NZD) is 0.43 pct lower at 1.6588.
- The New Zealand dollar to US dollar exchange rate (NZD/USD) is 0.46 pct higher at 0.8249.
Be Aware: All NZD quotes are taken from the inter-bank markets. Your bank will deliver your currency after levying a spread on the rate. However, an independent FX provider will guarantee you a more competitive spread, thus delivering up to 5% more currency. Please learn more here.
"The kiwi fell as China’s HSBC Manufacturing PMI for Jan dropped below 50, the first time since last June, which increased risk aversion," say Citigroup in a morning currency update.
The NZD came under further pressure on market fears of an abrupt pullback from abundant liquidity provision from the US Federal Reserve increased risk aversion.
Outlook remains positive for the New Zealand dollar
Despite the recent jitters in emerging markets and concerns over slowing Chinese growth, it is worth keeping in mind that the outlook for the NZ dollar remains constructive.
The NZ economy is growing strongly; Citi analysts expect the economy to grow 3.2% in 2014, which may support the kiwi in the medium and long term.
Due to continuous strong economic growth and rising CPI, Citi analysts expect the central bank may hike rates this week. The bank may hike the rate by 125 bps by year-end.
"NZD/USD may range trade between 0.8085- 0.8432 (6.27-6.54)," say Citigroup.
With inflation figures surprising to the upside, there is a possibility we could see the RBNZ tighten policy when they meet later this week.
The potential rate increase is keeping the NZ dollar competitive, preventing the currency from weakening further due to less risk appetite.
"The rate edged slightly higher in the last session, however we doubt the pound can drive the rate beyond 2.01 and therefore predict some sideways trading," says an exchange rate outlook note issued by Caxton FX.
British pound fights back after Carney torpedo
Meanwhile we are seeing a decent rebound in the British pound sterling this after the Bank of England Governor did much damage to the GBP rally on Friday.
As related by Moneycorp in a client note released today:
"Buried within Mark Carney's speech in Davos last Friday was the apparently innocuous phrase; "the appreciation of sterling will hold back the expansion of net exports". It was not even a sentence but the moment investors picked up on it they sold the pound, sending it a cent lower against the US dollar and half a cent lower against the euro."
Emerging Market concerns persist
Global bourses suffered a down morning today after growing concerns about emerging markets has caused foreign money to run for the exit.
"China’s recent contraction in manufacturing data has helped build a sense of unease in the emerging markets, if you pardon the pun, whilst emerging market currencies such as the Argentinian Peso plummeted last week," says Alex Conroy at Spreadex.
This coupled with recent jobs data that stirred up speculation on accelerated tapering means we could be in for a volatile few days when the FOMC meeting kicks off tomorrow.
The sell-off of emerging markets has provided a welcome boost for Gold, after declining over 25% last year and failing to rally on the announcement of tapering, analysts outlook for Gold in 2014 seemed bleak.
With foreign money looking for safe harbours to weather the EM storm, gold looks set to prosper.
