New Zealand & Australian Dollars vs Pound Sterling: GBP/NZD and GBP/AUD LATEST News Report, Forecasts and Commentary

The British pound (GBP) continues to advance against a struggling New Zealand dollar (NZD) on the global currency markets while moves against the Aus dollar are also positive as a general slump in the 'commodity currency' sector continues. 

At the time of writing sentiment towards the AUD and NZD have been hit by a stronger US Dollar which is enjoying a slew of good news releases that have come out of the US economy midweek, the highlight being news that the economy grew 4% in the second quarter, well ahead of expectations.

Rates at the time of writing:

• The pound sterling to Australian dollar exchange rate (GBP/AUD) is 0.04 pct higher on a daily basis having achieved 1.8176.
• The pound to New Zealand dollar (GBP/NZD) exchange rate is 0.11 pct higher at 1.9886.

Please note that the above quotes are taken from the wholesale markets; your bank will affix a spread to the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Find out more.

NZD slides, more losses forecast

The New Zealand dollar lost out dropping off to the lowest levels seen in nearly seven weeks after "the currency had the rug pulled from underneath it last week when central bank policy makers spoke of how they believed the currency to be significantly overvalued, which saw the kiwi dollar tumble," says Carl Hasty at Smart Currency Business.

For now momentum is towards the upside in the pound to NZ dollar exchange rates, we would forecast further gains from here.

An attempt at resistance at the big 2.0 GBP/NZD level cannot be ruled out at this stage.

NZD hammered by Fonterra news

Fonterra, the world's largest dairy exporter and New Zealand's largest company lowered its milk payout forecast for 2014/2015 by 14%. This follows a reduction back in May that lowered payouts by almost 20%. 

"This means that farmers stand to lose approximately $4 Billion in collective income, which equates to approximately 2% of GDP.  Although the decision was widely expected by the dairy industry, the decline in the New Zealand dollar shows that investors were off guard as NZD/USD dropped to its lowest level in 7 weeks," says Kathy Lien at BK Asset Management.

Australian dollar could weaken against the British pound further

The pound remains under pressure against the US dollar at present and therefore is not able to really gain impetus against any of its major peers.

Until we see some broad-based strength we would expect the GBP/AUD to remain rangebound.

"In the whole, we expect the GBP/AUD rate to remain range bound on the whole but continue on a slight upward trajectory," says Kamil Amin at CaxtonFX.

The Australian dollar has continued posting losses against most of its G10 peers, despite the fact that the Westpac-MNI consumer sentiment index rose in China.

"The most likely reason behind the recent decline in the currency is the fact that the US economy has continued showing signs of improvement. With the release of the Q2 growth data out of the US today, we could see further Australian dollar outflows as the need for high yield starts easing off," says Amin.

US dollar stays firm

The USD was firm vs. the rest of the G10 during the London morning, but EM ‘carry’ is so far still taking the latest shift fairly lightly.  

"Rate differentials for some key pairs, such as USDCAD, have already been in favour of the USD for some time, and that suggests that these latest moves coming in front of key US data represent positioning in FX getting caught up with rates and perceived economic divergence," says Stephen Gallo at BMO Capital.  

If the remainder of the week’s events is USD positive, weaker-than-expected data from outside of the US should have a bigger negative impact on those currencies vs. the USD.

Elsewhere, the Canadian dollar looks pressured.

"USDCAD rose during the London morning, coming within a whisker of the 1.0875 mark. The pair still trades ‘rich’ based on its primary drivers, but key rate differentials have continued to move in favour of USDCAD," says Gallo.  

Even more importantly, the in sample sensitivity of the pair to some of its better predictors, like EURCAD and ADXY, has started to gradually decline.  

"This could mean that USDCAD’s drivers are in the process of shifting towards rate differentials, and that could happen if the remainder of this week’s events is a further USD positive," says the analyst.