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Monthly Currency Update - GBP/NZD July 09.

Monthly Currency Update - GBP/NZD July 09.

Old Jun 30th 2009, 10:32 pm
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Default Monthly Currency Update - GBP/NZD July 09.

Hi All,

Here is an overview of what’s been happening in the Currency Markets throughout June with the Kiwi Dollar.

The summer has finally taken hold down in Windsor and it looks like we could be in for some record breaking temperatures over the coming weeks! (Fingers crossed). I’m sure many of you will be jetting off to even warmer climes over the coming weeks, so all the best to those that are.

GBP/NZD closed up marginally higher at the start of June as Sterling overshadowed the Kiwi, making the most of a broad improvement in global investor risk appetite. Domestically, the New Zealand government’s fiscal position was better than forecast in April, mainly due to improved returns from investment funds, although the prolonged recession saw the accounts remain deeply in deficit. The operating balance for the ten months to the 30th April was a deficit of NZD7.69 billion, or 12.9% better than the forecast made in last month’s budget of a deficit of NZD8.83 billion. The Treasury said the improved deficit was largely because of gains of NZD1.5 billion from various state investment funds.

The Kiwi pared losses after New Zealand’s Central Bank left interest rates steady at a record low of 2.50% for the first time in nearly a year and pledged to leave them there until 2010 as the recovery shows signs of life, prompting markets to price in the risk that the next move in interest rates will be higher. 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.

In New Zealand itself, the local economy is likely to have shrunk by up to 1.0% in the first quarter, extending an already prolonged recession, after data showed only a modest pickup in manufacturing sales for the period. Manufacturing volumes rose 0.2%, the first rise in more than a year, in the three months ended March. The data pointed to the manufacturing sector remaining under pressure and hurting economic growth in the first quarter. Separately, the Bank of New Zealand-business NZ’s performance of services index rose 2.5pts to 46.2 in May, but remained below the 50 level that indicated contraction, where it has been since April last year.

GBP/NZD inched marginally lower last week, with the Kiwi initially hitting a 3-week high against a broadly weaker Pound, before erasing gains on Friday after data showed the New Zealand economy contracted for a fifth quarter. The NZD advanced earlier in the week as New Zealand’s current account deficit narrowed in the first quarter as imports collapsed amid a recession, but at 8.5% of GDP, the gap was still seen as a barrier to lowering interest rates further. The annual current account deficit fell to NZD15.25bln in the March quarter, from NZD16.11bln in the previous quarter. However, the Kiwi slumped on Friday after local gross domestic product contracted by 1.0% in the first quarter, marking its longest contraction on record and reinforcing expectations the Central Bank will keep interest rates at current low levels well into 2010.

New Zealand has plenty of data released this week, with the May trade balance seen posting a larger surplus of NZD858mln and building consents expected to fall to 2.5% after April’s jump.

Current Central Bank Rates:

New Zealand (Reserve Bank): 2.5% (Next Meeting 30th July)
UK (Bank of England): 0.50% (Next Meeting 9th July)

Highs & Lows of June:

High: 2.6150 – on the 17/06/09
Low: 2.5043 – on the 01/06/09

Difference on £200k

High: 523,000 NZD
Low: 500,860 NZD

A difference of 22,140 NZD.

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Mark Bodega
Director - HiFX
Windsor2 is offline  

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