Here we see the GBP/NZD pair over the last 3 months. The trend is similar to the AUD, and the reason is the same - New Zealand has slashed it's interest rates this year in an attempt to weaken the currency to boost exports, which are very important to New Zealand. This had caused rates to remain steady against the pound, but now rates sit at a record low, analysts expect the next movement to be up. This may happen towards the end of this year, however it may not happen until next year.
The RBNZ said that bright spots were appearing for the economy for the first time in months, but stressed the risks remain to the downside, noting recent strength in the Kiwi could snuff out any fledging recovery.
The NZD carried its positive momentum after domestic retail sales rose by more than expected in April, driven mainly by car sales, suggesting consumer demand remained patchy but showed signs of stabilisinstabilizingt data realise showed only a modest pick up in manufacturing sales for the first quarter, but marking the first rise in more than a year.
Summary
Speculation of interest rate hikes will keep AUD and NZD low for the coming months. Markets will look to signs of recovery both in the UK, Aus and NZ. It's really nothing more than a tug of war between the economies, and whoever comes out of recession and wins the tug first, will see their currency strengthen. In the current climate, it would be a brave man who'd bet on the UK recovering before our cousins down under. As rates climb in NZ and AUS, it may also cause a resurgence in the carry trade. This will compound strength in the antipodean currencies.
So, of course rates will recover, and speculating as to when is nigh on impossible. However I believe it will be into 2010 before the UK catch up with economic recovery. Therefore if your requirement is for the next 3 months, consider a Forward Contract to lock rates in now and protect against further falls.
If you have longer until you need your currency, then Stop and Limit orders are to be considered. This means you can aim for a higher rate, but not do so blindly without protection if things dont work out. This article on managing fx risk should prove helpful if you would like to know more about the options available.
South Africa Cuts Interest Rate - South Africa's central bank has taken markets by surprise by cutting its lending rate from 7.5% to a four-year low of 7%. It was the sixth cut since December, bringing the rate down from 12%. This means a slightly weaker rand, and so any buyers of this currency should consider locking rates in - GBPZAR has not fallen as much as other currencies in the last 12 months.
Todays Data
The only real data of note is the Consumer Price Index for both the EU and US. It is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services excluding the volatile components like food and energy. The CPI Core is a key indicator to measure inflation and changes in purchasing trends.
EU - Consumer Price Index
US - Consumer Price Index
Can - Manufacturing Shipments
US - Consumer Sentiment Index
Ok, that's it for another week folks. Of course if you would like more information on anything contained within the blog, do get in touch below.
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