Pound Set for 'Bearish' Week Against New Zealand Dollar
- Written by: Gary Howes
Image © Adobe Images
A turbulent week looms for the pound as surging oil prices shake GBP/NZD markets.
The pound falls against its New Zealand counterpart on Monday as surging oil prices set the tone for FX markets.
The fall in GBP/NZD is curious as it seems to defy another important development: a sharp decline in global stock markets.
Usually when stocks are falling in this manner, the New Zealand dollar languishes at the bottom of the G10 pile courtesy of its high-beat nature. (This high beta simply explains how the NZD tends to fall against most currencies when markets are nervous and in sell mode.)
Compare GBP to NZD Exchange Rates
Find out how much you could save on your pound to New Zealand dollar transfer
Potential saving vs high street banks:
NZ$5,350
Free • No obligation • Takes 2 minutes
Yet, every crisis is a little different from those in the past, and we're witnessing an energy shock that is centred on the Middle East: the currencies belonging to countries that export energy are advancing against those belonging to net energy importers.
Britain is a net importer with a mere two days' worth of gas reserves and explains why pound sterling is down against most peers in response to brent crude crossing the $100/barrel barrier and domestic wholesale energy contracts rising a staggering 30%.
Pound Sterling Live
Curiously, New Zealand is also a net energy importer, which makes us wonder why the NZD is a relative outperformer. Indeed, we reported last week that Bank of America target the New Zealand dollar as a favoured short as the conflict in the Middle East continues, precisely because it has no natural energy resources.
It looks like the NZD is riding the coattails of its fellow commodity currencies higher on Monday (although NZD doesn't export energy, it is considered a commodity currency courtesy of its agricultural exports).
The drop in GBP/NZD takes the exchange rate back into the middle of the previous week's range, somewhat invalidating the budding recovery movement that we thought was shaping up following the end of January's sharp selloff.
Support is seen at 2.24 and we would imagine this level forms this week's target for GBP/NZD 'bears' in the event that current energy market anxieties persist.
