Dovish sentiment from RBNZ allows GBP gains

A mixed week for the pound this week, with a lack of sterling data to drive any momentum. Therefore, the pound has been reactive to events in its competitor currencies.

A move to a Dovish sentiment from the RBNZ midweek has allowed GBP to gain strongly against the New Zealand dollar, ending the week above 2.0700 and may allow a return to the highs of 2.0900 in the week ahead.

Against the US dollar, the cable rates have remained largely flat, a much more home buyers report yesterday had created a shock spike against the US dollar, but this has returned the main, with GBP/USD sat between 1.26-1.27. The performance of the US Stock Exchange remains the dominant factor on the dollar’s performance, and could continue to act as an anchor dragging the dollar down if the indexes remain high.

This has had a knock-on effect for GBP/AUD, with the AU dollar being so linked to fortunes in the US. The dip in the US dollar has seen GBP/AUD rise slightly this week, with GBP touching the near-term highs of 1.95 yesterday before correcting today with better-than-expected Chinese economic data helping the Aussie dollar.

GBP/EUR has been fairly flat since the middle of February – stuck in a range between 1.16 – 1.17 and little data of note this week to drive it beyond that range in either direction.

It is a new month today of course and the start of spring, and with that the potential for movement. Next week we have both meetings from the US Federal Reserve and the European Central Bank and the first opportunity the market anticipates we may see a beginning to the cutting cycle of interest rates. The big caveat to this of course is that most analysts suggest this won’t come until April, but there is the potential for a surprise early move and the volatility that would cause.