NZ and Aus Dollar vs the Pound: NZD Remains in a State of Weakness, AUD Looks for Consistency

• The pound to New Zealand dollar exchange rate (GBP/NZD) is 0.02 pct lower on a day-to-day basis on 1.9780.
• The pound to Australian dollar exchange rate (GBP/AUD) is 0.07 pct higher on a day-to-day basis having reached 1.7740.

(Keep in mind that these are spot market rates to which a discretionary spread is added by your bank/provider. An independent FX provider will however guarantee to undercut your bank's offer, in some cases delivering up to 5% more FX. Please learn more.)

NZ Dollar: Has the RBNZ Intervened?

The New Zealand dollar has had a contentious start to the final stages of August's trade with two massive drops being witnessed.

"The first still remains a mystery to many, but with light liquidity many are speculating that the Reserve Bank of New Zealand (RBNZ) intervened in the markets and pushed the NZD down against the USD. This might seem a little strange, but no other currency moved during that period and as a result, it was either the RBNZ or some other major player, but we will have to wait a few months for confirmation if it was the RBNZ," says a note from Blackwell Global.

Trade Data Pushes New Zealand Dollar Lower

The second driver of a lower NZD is the recent trade balance data, which was expected to be negative overall.

Trade balance data is cyclical in nature, and a fall was expected.

"However, it certainly was worse than the expected -475M, as it came in at -692M for the previous month. This is the norm really as can be seen from the chart below, and we should see some bottoming out of the negative trade balance data over the course of the new two months, as we shift back into summer," say Blackwell Global.

How Far Will the NZD Fall?

Commenting on the potential direction of the NZD against the USD, Blackwell tell us:

"With a strong trend line downwards and weak data, coupled with a strong USD. We could see further falls or the NZDUSD, the question is how far. I’m currently looking around at around the 0.82-0.81 cent band which tends to find a lot of support and liquidity in the market. However, there is a strong down trend and a crack through the 80 cent mark could certainly be a possibility in the future.

"The question is how far will it fall, and over the next few weeks we may indeed find out."

Australian Dollar: Support for AUD

Meanwhile the Australian dollar retains a more constructive stance when compared to its trans-Tasman neighbour.

Data indicated that the leading economic index in China climbed 1.3% in July.

"Data out of China has continued dominating any form of price action we have seen across Australian dollar markets and we expect this to continue. With little data out of Australia this week, we expect the GBP/AUD rate to remain vulnerable to momentum shifts in either direction. There is uncertainty surrounding labour market slack in both economies and this is likely to remain until we see data show greater signs of consistency," says Kamil Amin at foreign exchange brokerage Caxton FX.

Central bank comments from last weekend's Jackson Hole Summit has continued dictating the price action we have seen across global markets over the past few days.

"Last week's RBA comments must have raised a few eyebrows amongst market participants mainly due to the lack of any new information. Governor Stevens reiterated that the Australian economy needed an injection of confidence rather than lower interest rates, and warned that the risk of the Australian dollar dropping to lower levels was underestimated," says Amin.