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4 Jul 2013
Flash: Pressure mounts on NZ crosses – BNZ
FXstreet.com (New York) - The NZD is again the strongest performing currency of the past 24 hours as fading risk aversion allows fundamentals to retake the reins as the key driver of currencies, notes the BNZ Research Team.
Against this background, no one should be surprised to see the EUR and GBP sliding back to the bottom of the currency performance rankings. The surprising actions of the Bank of England and European Central Bank have been directly responsible for the weakness in European currencies. Both took the unprecedented step of offering ‘forward guidance’ at their policy meetings overnight in what many will see as the latest skirmish in the ‘currency wars’.
In reality, the European central banks are simply trying to disassociate themselves from the policy actions of the US Fed, and lean against the run up in global interest rates. “The gains in NZD/GBP and NZD/EUR certainly fit with our view that these currencies had got themselves a touch oversold in the recent bout of market turmoil. And, in the absence of a resurgence in risk aversion, we can expect NZ’s superior fundamentals and the RBNZ’s more hawkish policy stance to continue to exert mild upward pressure on these currencies. Our quarter-end forecasts are 0.5250 for NZD/GBP and 0.6150 for NZD/EUR, but upside risks abound.” the team adds.
Against this background, no one should be surprised to see the EUR and GBP sliding back to the bottom of the currency performance rankings. The surprising actions of the Bank of England and European Central Bank have been directly responsible for the weakness in European currencies. Both took the unprecedented step of offering ‘forward guidance’ at their policy meetings overnight in what many will see as the latest skirmish in the ‘currency wars’.
In reality, the European central banks are simply trying to disassociate themselves from the policy actions of the US Fed, and lean against the run up in global interest rates. “The gains in NZD/GBP and NZD/EUR certainly fit with our view that these currencies had got themselves a touch oversold in the recent bout of market turmoil. And, in the absence of a resurgence in risk aversion, we can expect NZ’s superior fundamentals and the RBNZ’s more hawkish policy stance to continue to exert mild upward pressure on these currencies. Our quarter-end forecasts are 0.5250 for NZD/GBP and 0.6150 for NZD/EUR, but upside risks abound.” the team adds.