Both the British pound and the New Zealand dollar are included in the list of ten most traded currencies worldwide, making the GBP/NZD is one of the most popular cross-currency pairs in the foreign exchange market.
While Brexit uncertainty continues to hamper the value of the British pound, the New Zealand dollar is predicted to outperform over the coming weeks and months amid the recent developments in the U.S.-China trade war and further interest rate cuts from the Fed. Considering all these global political and economic turbulence, is it a good time to invest in the GBP/NZD pair?
In this article we cover the basics of the GBP/NZD pair, take a look at what factors influence its rate, review its recent performance and check out the GBP/NZD forecast.
The basics you need to know about the GBP/NZD pair
The GBP/NZD is the abbreviation for the British pound to New Zealand dollar currency pair. It represents how many New Zealand dollars — which is the quote currency — are needed to buy one pound — the base currency.
Among international traders and investors, the pair is often called the ‘kiwi’. The origin of the nickname derives from the national bird of New Zealand stamped on the one-dollar coin.
Trade British Pound / New Zealand Dollar CFD
The GBP/NZD is an example of what's known as a cross-currency pairing. This means that the pair is traded directly, without being first converted into the U.S. dollar. In recent years, this type of forex pair has attracted many international traders. The opportunity to directly exchange pounds for the NZ dollars offers protection from any volatility associated with the U.S. dollar. Moreover, once incorporated in one’s investment portfolio, the GBP/NZD pair can serve as a hedging tool against fluctuations in other international currencies.
Factors to watch when investing in the GBP/NZD pair
There are a number of factors that have a great impact on the value of the GBP and NZD, both in relation to each other, and to other currencies. The key driver of the pair’s rate is the overall health of the two large economies: those of the UK and New Zealand.
Therefore, when making an investment decision regarding the GBP/NZD pair, it is always important to pay attention to the following factors: GDP growth, import and export data, employment figures, geographical implications, the rate of inflation as well as any political or economic event that can have a significant influence on the currency pair. Such examples could be, the UK’s ongoing issues with Brexit, or the rate of commodity production in New Zealand.
The GBP/NZD pair is also affected by the interest rate differential between the Bank of England and the Reserve Bank of New Zealand. Higher interest rates tend to have a positive effect on the currency, at least in the short term, and vice-versa.
The New Zealand dollar is a commodity-based currency. The country’s main trading partners are China, Australia and the U.S. Therefore, if there is a decline in economic growth in any of these countries or an overall slowdown in global trade, it can result in the uncertainty for the NZD. Such a development would lead the GBP/NZD exchange rate to gain.
Any developments in the U.S. Federal Reserve can also influence the value of the New Zealand dollar. For instance, after the Fed raised interest rates 7 times since December 2015, the New Zealand dollar suffered significant losses.
If you want to make accurate GBP to NZD predictions, you have to stay up-to-date with the latest market trends and news. Luckily, modern financial markets have full media coverage. All the needed information can be easily found from a wide variety of resources, both online and offline.
Even though the market movements of this currency pair tend to be rather volatile, the GBP/NZD pair can offer great opportunities for experienced investors and traders looking for a diversification tool to move away from the forex majors, such as GBP/USD, EUR/USD, USD/JPY or EUR/GBP.
GBP/NZD outlook: yesterday, today and tomorrow
Let's take a look at the GBP/NZD trend by checking its historical exchange rate for the past 17 years:
In January 2002, the pair traded at one of its highest levels – 3.4931. Ever since, the GBP/NZD value had mainly been in the downtrend. By 2010, the pair was traded at the 2.30 level. Over the course of the next three years, with the exception of occasional reverses, the GBP/NZD pairing eased lower until it reached 1.82.
In 2014, the GBP/NZD rate did return to trading around 2.06 in response to the declining price of dairy products, New Zealand’s main commodity. In October 2016, the pair fell to its lowest rate of 1.6517. However, the pound gained upside momentum in July 2017, rising to 2.047 by October 2018. During 2019, the GBP/NZD pair has seen some volatility, characterised by multiple price fluctuations. Throughout this year, the pair’s average so far is set at 1.9140, with the highest rate of 2.0030 and the lowest of 1.8280.
At the time of writing, on October 7th, 2019, the GBP/NZD pair traded at around 1.945.
What to expect: the GBP to NZD forecast in the years ahead
In 2019, the New Zealand dollar has been rather volatile, reflecting continuous escalations and de-escalations in the ongoing U.S.-China trade war. The NZD struggled with every increase in tensions, only for it to then be rescued by each short-lived truce to have been agreed.
The trade tensions are not the only factor predicted to drive the Kiwi higher in the months ahead. Changes in the international interest rate are also expected to support the New Zealand dollar if the Fed decides to further cut the U.S. rates.
In regards to the GBP, Brexit tensions remain the main catalyst for the movement of sterling.
According to analysts from Merrill Lynch Bank of America, the GBP/NZD pair is forecasted to end 2019 at around 1.92. The bank predicts that the New Zealand dollar is set to outperform over the coming months, benefiting the most from the anticipated Fed’s interest rate cuts and the recent detente in the U.S.-China trade war.
Based on the forecast of Walletinvestor.com, a long-term increase is predicted for the GBP/NZD pair. The forex rate prognosis for September 2024 is set at 2.309. Therefore, if you invest in this pair today, the revenue is expected to be around +18.36% in 5 years.
Based on their GBP/NZD forecast 2019 – 2020, the pair is anticipated to trade in the uptrend:
However, not all analysts are as upbeat in their outlook for the New Zealand currency. According to the GBP vs NZD forecast provided by another popular forecasting agency, Longforecast.com, the pair’s rate is expected to fall to 1.818 by October 2023.
Here is their pound against New Zealand dollar prognosis for the next few years:
Technical GBP/NZD analysis from Tradingview.com shows real-time ratings for the pair for one month. Here are the results:
The GBP/NZD value will likely remain driven by a plethora of political developments in the coming months and years. Before investing in the GBP/NZD pair, we suggest you first consider the overall global geopolitical and economic picture. If you think you are not ready to make long-term investment commitments, but still want to try to profit from the forex volatility, you can do so through contracts for difference (CFD), instead.
You can learn more about CFD trading with free online courses and stay on top of the latest pound vs NZ dollar news with Capital.com.
So, what are your predictions on the pound to NZ dollar forecast?