Buy the Pound, Sell the New Zealand Dollar says Europe's Fastest Growing Asset Manager

Could a turn in fortunes be around the corner for the GBP/NZD? Yes, if Europe's fastest growing asset manager has again called the outlook right. 

Nordea Bank’s Stable Return fund is betting the British Pound is due to recover and the New Zealand and Australian Dollars are likely to bear the brunt of the recovery.

This is the same fund that earlier this year bet against Sterling using the Yen.

The move paid off as the Pound has fallen by 28% this year against Yen thanks to the Brexit vote in June. 

It is this kind of decision-making that has seen the fund record inflows of 10 billion euros in new cash in 2016  before Nordea closed the fund to new clients last month.

Having fallen notably fund managers believe the valuation of Sterling can be considered closer to fair. 

"We’ve started to short commodity currencies instead that are looking a bit pricey," Asbjoern Trolle Hansen, head of multi assets at Nordea Asset Management told Bloomberg.

Hansen said the fund is using the Pound to bet against the Australian and New Zealand Dollars.

Also concerned that chasing the Pound ever-lower could prove fruitless are BNP Paribas who in a recent note told clients that the currency may now have priced in all its Brexit bad news and could be due a rebound.

Latest Pound / New Zealand Dollar Exchange Rates

	Live: 2.3088▼ -0.17% 12 Month Best: 2.3553
*Your Bank's Retail Rate	2.2303 - 2.2395
**Independent Specialist	2.2765 - 2.2857 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Overall we are also bullish for the pair in the future due to the extremely long hammer which formed during the flash crash, which according to research tends to indicate exhaustion and a reversal higher.

The occurrence of the triangle which formed before the fat finger breakdown may also be an early warning of reversal as these patterns are usually the penultimate move in a trend.

This means the spike lower may have been the final move in the downtrend.

Currently, the exchange rate is churning but if it breaks above 1.7550 it will probably indicate a continuation up to 1.7625.

A further break above 1.7700 would add bullish confirmation and open the door to a likely continuation up to 1.7890 level.  

Data for the New Zealand Dollar

Although poor Chinese data has weighed on the New Zealand dollar of late, as well as continued expectations the Reserve Bank will cut interest rates at their next meeting in November, the currency still has reserves of strength.

New Zealand inflation data for Q3 is released at 22:45 PM B.S.T on Monday, October 17.

Year-on-year, inflation is expected to have grown by only 0.1% in Q3, and if this is the case it will intensify investor expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates at its next meeting, thus weakening the Kiwi.

“Just this week, the RBNZ said inflation is low and monetary policy accommodative, but food prices are on the rise, so a soft CPI report is not a given,” says Kathy Lien at BK Asset Management.

Tuesday sees the Global Dairy Trade Auction price fix and since this is New Zealand’s primary export it is influential.

Data for the Pound

This is actually quite a busy week in terms of data for Sterling.

Whether markets actually take account of the figures is however debateable.

That said, it would be negligent if those watching the FX market were not aware of what is due Tuesday sees the release of September CPI, which showed a 0.6% rise previously on a year-on-year basis.

Employment data dominates on Wednesday, with Unemployment Rate forecast to remain at 4.9%, Average Earnings at 2.3%, and Claimant Count forecast to have risen by 3K.

Thursday sees the release of September Retail Sales which are expected to have grown by 0.3%.