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Need to transfer money between NZD and GBP? What's happened this week? Read here.

Written by Sam Coxhead on August 25th, 2011.      0 comments

5:03 PM (NZT) Just a quick update for you on this NZD/GBP (GBP/NZD) pairing. The range so far has been .4948 – .5068 (GBP/NZD 1.9732 – 2.0210).
 
The NZD has seen mostly quiet grinding appreciation against the GBP from the lows at the start of the week. The appear to have been two primary factors at play. From the NZD perspective, the interest rate market has again started to price further chances of the removal of the emergency cash rate stimulus by the Reserve Bank of New Zealand (RBNZ) before the end of the year. As with all markets of late the cash rate expectations have been moving a lot. The relatively stable Chinese HSBC Manufacturing PMI numbers on Tuesday gave some reassurance that the momentum in the all important Chinese economy has not slowed as much as some expected, and with the NZ economic fortunes closely tied to those of growing Asia, this has been mildly NZD positive. Today’s NZ retail sales data was better than expected and whilst this did not caused a sharp appreciation in the level of the NZD, it certainly will have added to the tone.
 
In the UK there has been a quiet patch in terms of economic data. The GBP has had a fairly good couple of weeks on most cross rates, and this week has suffered from a little profit taking. The UK economy is also closely linked to that of Europe and with the debt issues remaining at the fore-front of investor focus, a little selling into the relative GBP strength was to be expected.
 
With little chance of any hikes in the cash rate from the bank of England in the next 12 months, and the  partially priced bringing forward of hikes from the RBNZ, the interest rate differential has again widened between the respective cash rates and this has added to the tone of slight appreciation on the week.
 
The annual central bankers symposium in Jackson Hole kicks off this Friday with the address by US Federal Reserve head Ben Bernanke. Bernanke has used this opportunity to flag changes in monetary policy before and this address will be widely followed. Any hint of further quantitative easing would most certainly be NZD beneficial. While it remains unlikely in my view, there is a risk there that is being watched closely by the markets.
 
Next week in NZ, there are just two pieces of economic data of focus. Building consents on Tuesday and then the NBNZ business Confidence number on Wednesday. In the UK we have housing numbers Tuesday, manufacturing numbers Thursday and finally construction numbers on Friday.
 
The overall lead will likely to continue to be the general market appetite for risk. Should investor fears continue to subside, expect the NZD to test resistance to the topside. Fear and risk aversion is not far from the surface at any given time as we have seen over the last few week, any further bouts of fear with no doubt see the GBP return to demand.
 
Expect initial resistance NZD/GBP at .5100 (GBP/NZD support 1.9610), whilst on the downside .4950 and .4900 offer levels of support (GBP/NZD resistance2.0200 and 2.0410)
 
The current interbank market is at .5060 (GBP/NZD 1.9763)
 

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