Why is the GBP/NZD pair important to traders?
The GBP/NZD pair brings together two of the world’s most-traded fiat currencies: the British pound and the New Zealand dollar. It shows us how much NZD is needed to buy £1.
Sterling is the fourth most-traded currency worldwide, while the New Zealand dollar is 10th. Among international investors and traders, the GBP/NZD pair is commonly known as the “kiwi”. The origin of this nickname can be traced back to the flightless bird that’s pictured on New Zealand’s $1 coin.
GBP/NZD is an example of a cross-currency pairing. This means these two currencies can be traded directly without being converted into US dollars first. Cross-currency transactions have grown in volume over recent years – driven by international traders who are keen to cut costs and avoid volatility associated with the greenback. The fact that non-USD pairs are now more commonly traded also means spreads have tightened, making it even cheaper to move from one currency to another.
Because GBP/NZD can be prone to volatility and experience significant rate fluctuations, the pair can offer huge potential for speculation. It could also be a great alternative for experienced investors and traders looking to diversify away from forex majors such as GBP/USD, EUR/USD, EUR/GBP and USD/JPY.
GBP/NZD trading hours
The forex market is available 24 hours a day – but GBP to NZD trading tends to be at its most active in the UK between 8am and 5pm. Major market announcements can trigger a flurry of activity outside of these hours, too.
History of GBP/NZD
Pound sterling dates all the way back to 775 AD – and evolved into its current form following decimalisation in 1971. GBP represents a significant amount of daily trades around the world.
The New Zealand dollar is far newer and was introduced in 1967 to replace the New Zealand pound. A staggering 27 million banknotes were printed for the changeover, as well as 165 million new coins. Today, NZD has an average daily trading volume of US$68 billion.
According to the historical GBP to NZD graph, the pair hit one of its highest levels in September 2001, when one pound cost NZ$3.6909. But this wasn’t to last – and it paved the way for a downtrend that lasted several years. By August 2011, GBP/NZD had dropped to 1.85. And over the months that followed, with the exception of occasional reverses, the GBP/NZD pairing eased even lower, eventually hitting 1.79 in April 2013.
After bottoming out, the pair’s rate returned to trading at about 2.06 in the second half of 2014 in response to the declining price of dairy products, New Zealand’s main commodity. By September 2015, the exchange rate had soared to 2.4543.
Another turning point in GBP to NZD history was the Brexit referendum in June 2016, when the pair gained strong downside momentum. The UK’s decision to leave the EU was seen by the global community as a negative move for the country’s economy – and the uncertainty led to many investors pulling their money out of the UK at a rapid pace. By October 2016, the exchange rate had dropped to 1.6846.
The reverse in the negative trend dominating the pound to NZ dollar pairing began in July 2017, with rates rising to 2.0377 by October 2018. During 2019, the pairing suffered some volatility once again. Lows of 1.8280 were seen in July that year, while highs of 2.0566 followed in October.
The UK pound to NZ dollar pair started 2020 at 1.9647 and climbed to 2.0958 by 1 April. The coronavirus pandemic has triggered plenty of volatility ever since.
Join Capital.com to follow GB pound to NZ dollar rate in real time and stay on top of the latest market developments with our live GBP/NZD chart.
Factors influencing the GBP/NZD pair
One of the main drivers in the GBP/NZD rate is the economic health of the UK and New Zealand. When getting involved in GBP to NZD trading, it is worth paying attention to a wide range of economic factors including GDP growth, import and export data, employment figures and inflation rates.
Political events can also have a significant influence on the pair. One of the greatest examples is the ongoing turmoil surrounding Brexit that continues to weigh on the pound’s value.
The price of sterling and the New Zealand dollar is also impacted by monetary policies enacted by the Bank of England and the Reserve Bank of New Zealand. For instance, whenever these central banks think inflation is rising too quickly, they will use monetary policy tools in an attempt to bring it under control. Interest rates could rise as a result, which is another factor that traders should consider when analysing the market and the possible future direction of the GBP/NZD pairing.
In addition, the New Zealand dollar is a commodity-based currency. The country’s main trading partners are the US, Australia and China. Therefore, the NZD can face uncertainty if economic growth declines in any of these nations – or if there’s an overall slowdown in global trade. In this scenario, the GBP/NZD rate would go higher on the back of a weaker New Zealand dollar.
How to trade GBP/NZD CFDs
An individual can trade the GBP to NZD currency pair with a regular forex contract in the spot, forwards, or futures market. However, today, one of the easiest and most popular ways that one could trade the GBP/NZD is with contracts for difference, or CFDs.
A contract for difference is a financial contract, typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade. You are more liquid when you purchase CFDs as you are not tied to the asset: you have merely purchased the underlying contract.
In addition, CFDs give the opportunity to trade GBP/NZD in both directions: you can try to profit from both upward and downward future price movement. You can either hold a long position, speculating that the GBP/NZD’s rate will rise, or a short position, speculating that the rate will fall. This is considered a short-term investment, as CFDs tend to be used within shorter timeframes.
Trade British Pound / New Zealand Dollar CFD
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Why trade GBP/NZD CFDs with Capital.com
Advanced AI technology at its core: a Facebook-like news feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative news feed offers a range of materials to put her back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to help polish your investment strategy. This will help you to refine your approach when trading GBP/NZD.
Trading on margin: thanks to margin trading, Capital.com provides you with the opportunity to trade British pound to New Zealand dollar CFDs and other top-traded currency pairs even with a limited amount of funds in your account.
Trading the difference: when trading CFDs on GBP/NZD, you speculate on the rise or fall of its exchange rate. CFD trading is no different from traditional trading in terms of its associated strategies. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives.
All-round trading analysis: the browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. For instance, a trader could choose to have GBP/NZD analysis and GBP/NZD forecasts as a big part of their feed. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.
Focus on safety: Capital.com puts a special emphasis on safety. Licensed by the FCA, CySEC and NBRB, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.
How is Forex different from other markets?
For somebody new to the world of the foreign exchange market, it can seem like a rather intimidating place. However, once you’ve grasped the basics, trading on Forex is actually quite similar to other markets. There are just a few key differences for one to know when getting started.
For instance, as there is no central exchange and it is a market driven by the world’s large financial institutions, the volumes can be huge in comparison to other markets. Not only does this lower the overall cost to traders but it also makes entering and exiting trades easy.
I keep seeing the word 'pip', what does that mean?
A pip is a unit of measurement for currency movement. It is the fourth decimal place in most currency pairs. For example, if the GBP/NZD moves from 1.1920 to 1.1921, that's a one pip movement. However, in order to grant its clients even tighter spreads, more accurate pricing execution and better liquidity, Capital.com provides fractional pip pricing, which means you will see a fifth decimal place, such as 1.19215, where the 5 is equal to five-tenths of a pip, or five pipettes.
The word ‘pip’ stands for 'percentage in point.'
Does Capital.com take a commission from my Forex trades?
The simple answer is 'no' – we, at Capital.com, make money through the bid-ask spread. This is different from traditional trading where a broker would earn commission on every buy and sell that the customer takes part in.