Market Forecast - Sterling Vs. Kiwi Dollar - 11/05/09
Sterling fell sharply last Thursday after the Bank of England announced an extension to its quantitative easing programme, adding another £50bn to the pot. The Euro managed to escape punishment after the ECB announced similar measures along with an interest rate cut to 1%. Meanwhile, the New Zealand Dollar was one of last week's largest gainers as it took advantage of the pound's weakness and tentative signs of recovery in the global economy that spurred investors to buy riskier high yielding assets. At 3%, the Kiwi still offers an attractive return compared to sterling and the US dollar, both of which offer virtually no interest.
The technical outlook for the Sterling/Kiwi rate is deteriorating, and we are now testing the key technical floor at 2.5000. We've been trading significantly below this support level today, and the Sterling/Aussie rate is now touching thirteen year lows below 2.0000, which does not bode well for this pairing. Clients with currency requirements should strongly consider covering them now, or hedging at least half of any exposure while we are still some way from the next major support levels at 2.4500 (January low) and 2.4125 (2008 low).
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Analysis provided by TorFX
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