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GBP/NZD Exchange Rate Reaches Near 4-Month-Best but ‘Kiwi’ Outlook Strong Too

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GBP/NZD Exchange Rate Steadies after Touching Best Since November 

Despite recent appeal for risk and trade-correlated currencies like the New Zealand Dollar (NZD), the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is still advancing. The Pound (GBP) remains broadly while mixed risk-sentiment weighs on the ‘Kiwi’. 

GBP/NZD is a volatile exchange rate and the pair has seen especially jittery movement in recent weeks. Last week saw GBP/NZD briefly shed as much as a cent, before ultimately closing the week half a cent higher than its opening levels. 

Since opening this week at the level of 1.9308 though, GBP/NZD has seen an upside bias. At the beginning of the week, GBP/NZD touched on a high of 1.9452 – the best level for the pair since November 2020. 

At the time of writing on Wednesday, GBP/NZD is trending a little lower in the region of 1.9363 as Sterling’s advance slows. However upcoming key UK data on Friday could boost the Pound’s appeal even further. 

Pound (GBP) Exchange Rate Rally Softens but Potential for Further Gains Remains 

The Pound remains one of the most appealing major currencies. This week the British currency is continuing to rally amid expectations that Britain will be one of the first major economies to recover from the coronavirus pandemic. 

While there has been little fresh developments influencing the Pound, it has been able to gain against rivals due to mixed risk-sentiment. 

Today, some limited risk-aversion is keeping the Pound buoyed against riskier rivals. According to Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets: 

‘It’s all about the broader risk dynamics and ultimately that’s still going to be the arbiter of Sterling performance (today), 

If we can see some degree of stabilization in terms of US yields and we don’t see that yield spike encouraging an additional risk sell-off then I think Sterling will remain reasonably well-supported,’ 

New Zealand Dollar (NZD) Exchange Rates Struggle after US Dollar Rebound 

A surging rebound in demand for the safe haven US Dollar (USD) since last week has left the New Zealand Dollar floundering. 

New Zealand’s outlook remains broadly optimistic overall due to the nation’s effective handling of the coronavirus pandemic. However, as a risk and trade-correlated currency the ‘Kiwi’ was hit by a surge in US Dollar demand. 

The New Zealand Dollar found a little reassurance in today’s news that the Reserve Bank of New Zealand (RBNZ) would remove some of the temporary liquidity facilities it had implemented for the pandemic. 

According to Vanessa Rayner, Head of Financial Markets at the RBNZ: 

‘Financial market conditions have improved significantly since March 2020 when these facilities were introduced and the usage of these special facilities has been very low in the last six months,’ 

Despite this, the RBNZ has continued to signal that it will not tighten monetary policy any time soon. 

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Outlook Could Rise Further 

The Pound has been rallying for some time now, but there is potential for the British currency to climb even higher. 

If upcoming UK data impresses investors and New Zealand data disappoints, investors will have more reason to keep buying the Pound. 

Thursday’s Asian session will see the publication of New Zealand’s February food inflation report. New Zealand business PMI data will follow during Friday’s Asian session. 

Stronger than expected New Zealand data, combined with a return of risk-on movement, could see GBP/NZD recoiling from this week’s 4-month-highs. 

The Pound is likely to remain fairly resilient though, unless Friday’s slew of UK data disappoints. 

UK trade balance, production stats and growth rate results from January will all be published. Strong data could boost hopes for even more momentum in Britain’s economic recovery. 

On the other hand though, the Pound to New Zealand Dollar (GBP/NZD) exchange rate could see its recent rally come to an end if UK data is poor enough to negatively influence the Pound outlook.