A dismal set of domestic Trade Balance figures held back the New Zealand Dollar

Foreign Currency Market Update – GBP / NZD Update

A dismal set of domestic Trade Balance figures for July held back the New Zealand Dollar throughout last week’s session in the currency markets. The closely-watched import/export numbers, released during last Monday’s Asian session, pointed to a July deficit of NZD774m versus analysts’ forecasts of a trade gap of only NZD16m. The publication suggested that the weakening of the New Zealand Dollar during the middle part of this year has not been enough to give domestic exporters the boost which the nation’s government had hoped for.

Meanwhile, geo-political factors added to the selling pressure on the Kiwi throughout the week. A deterioration of the situation in Syria, where the evidence mounts that forces loyal to despotic leader Bashar al-Assad continue to launch chemical attacks on the nation’s beleaguered population, has caused appetite for risk to leak from the market. With the exact nature of the West’s response to events still uncertain, the New Zealand tender may remain under pressure for some time to come.

The highlight of a sparse NZ/UK data schedule this week comes in the form of Thursday’s Bank of England policy announcement. Analysts are unanimous in their expectation that the BoE will keep interest rates and QE on hold at 0.50% and £375bn respectively. However, the decision may be accompanied by a statement; if this proves to be the case, then based on comments coming from Threadneedle Street since new Governor Mark Carney took up his post in July, Sterling will be highly likely to give up renewed ground. If the BoE does kick start a retracement for GBP NZD, then the next level to the downside for the pair comes at its one-month low of 1.9155.

However, if last week’s downward drift for global stock markets persists, pointing to a continued lack of confidence amongst international investors, then expect the risk-driven Kiwi to lose further ground. In such an event consecutive closes above the well-tested band of resistance at the two to one level will be required in order to confirm the pair’s extant uptrend.

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