BLBG: New Zealand Dollar Rebounds During U.S. Trade, British Pound Remains Under Pressure
The New Zealand dollar pared the overnight decline and is the best-performing currency against the greenback during the U.S. trade, while the British Pound extended the sell-off from Friday to reach a low of 1.5192 on Monday.
The New Zealand dollar pared the overnight decline and is the best-performing currency against the greenback during the U.S. trade, and the high-yielding currency may continue to retrace the sell-off from the previous week as price action bounces back ahead of the 50-Day SMA at 0.7031. The NZD/USD is 10+pips higher from the open following the rebound from 0.7054, but the lack of momentum to cross above the 120-SMA at 0.7108 may keep the exchange rate within a narrow range ahead of the Asian session as the economic docket is expected to consumer prices rising at an annual pace of 2.3% in the first quarter, which would be the fastest pace of growth in a year. As the outlook for growth and inflation improves, the Reserve Bank of New Zealand may look to normalize policy further in the second-half of 2010, and expectations for a rate hike later this year could drive the exchange rate higher over the coming months. However, Credit Suisse overnight index swaps are up 161bp this month after rising as much as 181bp in March, and the pull back in interest rate expectations could leave the NZD/USD within a broad range going into May.
The British Pound extended the decline from Friday and tumbled to a low of 1.5192 during the overnight trade, and the exchange rate may trend lower going into the Asian trade as the recent rally fails to retrace the decline from February. The GBP/USD is 80pips lower of the day after moving 137% of its ATR, and has pared the overnight decline during the U.S. session to cross the 50-Day SMA at 1.5264 as the 30-minute RSI bounces back from oversold territory. As a result, the pound-dollar may continue to hold the narrow range carried over from earlier this month, which could lead the pound-dollar to push back above the 10-Day SMA at 1.5353, but the consumer price report due out at 8:30 GMT is likely to spark increased volatility in the exchange rate as central bank Governor Mervyn King expects inflation to fall back below the 2% target later this year. Nevertheless, the BoE is likely to maintain a dovish tone in its policy minutes from the April meeting, but a shift in the central bank’s rhetoric could push the exchange rate higher as investors weigh the prospects for future policy.
