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Whats happening on the NZD/GBP (GBP/NZD) cross?

Written by Sam Coxhead on September 1st, 2011.      0 comments

2:05 PM (NZT) The NZD has continued last week’s appreciation against the Pound Sterling, although the momentum does appear to be easing as we approach some reasonable resistance levels. The interbank range so far has been .5122 to .5262 (1.9004 – 1.9524).
The renewed enthusiasm for growth assets such as the NZD has been driven by a couple of factors. Firstly, the Bernanke speech at Jackson Hole last weekend was cohesive with the US FOMC monetary policy meeting minutes released this week. A further program of quantitative easing remains a prospect should the economic conditions warrant it. Secondly, the economic data flow out of the US has seen a rebound in strength. More positive durable goods, personal consumption and factory orders numbers have heartened analysts of the US economy. These have added to the general market risk appetite, and therefore to demand for the NZD. Gold and US Treasuries have softened and this is indicative of this week’s change in sentiment, the big question is how long will it last?
The domestic NZ economic news has also been reasonably positive , if somewhat limited. The building consents and NBNZ Business Confidence numbers were both healthy, and represent a healthy rebound from the slump caused by the earthquakes earlier in the year.
This week’s positive domestic Australian data will also add support to the NZD on other cross rates, the GBP included.
In the UK there has little news to report, although anecdotal evidence remains that the GBP saw  reasonably large sell flows ahead of the end of month, creating its softer price action. For the remainder of the week the focus will be based in the UK with housing, manufacturing and construction numbers due for release. The focus on the European bank debt issues may also be weighing on the GBP a little, due to the close interaction with the banking sector in the UK.
Next week holds little to focus on in New Zealand. In the UK the release of the Bank of England Monetary Policy Committee decision on the cash rate and “Asset Purchase facility(QE program)” will be closely watched. No change is expected, but given the move in the balance towards easier policy, nothing can be discounted at any stage.
The current interbank price is .5245 (1.9066).