GBP-NZD Trading

GBPNZD is the ticker symbol for the British pound to New Zealand dollar exchange rate on the Forex markets. Both the pound sterling and the New Zealand dollar are considered major currencies, but the GBPNZD pair is considered a minor pair because it does not constitute the US dollar. Minor currency pairs typically feature lower liquidity and trading volumes compared to major currency pairs. They are also traded with relatively wider spreads.

In the GBPNZD Forex rate, GBP is the base currency, whereas NZD is the quote/counter currency. This means that at any given time, the price of GBPNZD represents the amount of New Zealand dollars it would take to exchange for one unit of the pound sterling (1 GBP to NZD).

History of GBPNZD

The GBP to NZD pair combines currencies of nations that have a shared historical relationship. The GBP needs no introduction – it is the oldest currency that is still in circulation to date, and it was at one time the most powerful legal tender on the planet. GBP still remains a powerful currency, with London a major global financial hub. Nicknamed the ‘Quid’, the pound sterling is the official currency of the United Kingdom and British Overseas Territories, as well as the UK Crown Dependencies. The first-ever pound coin circulated around 1489, but the currency traces its roots way back to 775AD when it was linked to the weight of Silver. The formation of the Bank of England in 1694 brought about the production and circulation of the first-ever pound notes. The British Empire started linking the pound’s value to Gold in the 18^th century and well into the 19^th century when that became the standard throughout Europe. By the start of the 20^th century, the pound sterling was the most important currency in the world, controlling over 60% of global trade and debt. But it could not hold its turf as it was massively devalued due to British missions around the world as well as the UK’s efforts in World War I. By the start of World War II, the GBP had to peg its currency to the US dollar. This peg was collapsed in the 1970s when the Bretton Woods System was abandoned. In the late 1990s, the UK did not join other members of the European Union in adopting the euro and they even exited the EU altogether in 2016. GBP is now (as of February 2022) the 4^th most used currency in the world, both in circulation and reserve.

The New Zealand dollar (NZD) is the official currency of New Zealand, the Cook Islands, Niue, Tokelau, and the Pitcairn Islands. It was introduced in 1967, replacing the New Zealand pound that had been in circulation since the early 1930s. The introduction of the NZD was the culmination of plans to move to a decimated currency in the country. Before the straightforward decimal NZD (which is divided into 100 cents), the New Zealand pound was considered very complicated. The pound was divided into 20 shillings, which were, in turn, divided into 12 pence. So, 1 New Zealand pound was worth 240 pence. The NZD then replaced the pound at the rate of 2 NZD for 1 pound. The NZD was initially pegged to the US dollar, but the collapse of the Bretton Woods System in the 1970s also saw it freely floated in the Forex markets. Today, the New Zealand Dollar is the 10^th most traded currency in the world (February 2022).

GBPNZD Historical Price Performance

GBP/NZD traded around 3.20 at the turn of the millennium. After a brief drift higher, it entered a long-term downtrend and hit a trough around 2.43 in late 2005. It briefly revisited the 3.00-handle in mid-2006 but tumbled again to lows of below 1.80 in the first half of 2013. It recovered to around 2.45 in late 2015 but fell again to around 1.70 in late 2016. In recent years, GBPNZD has traded between 1.84 and 2.10.

Major Bodies Influencing GBPNZD – GBP To NZD Trading

Here are some of the factors to look out for when engaging in GBP/NZD trading:

Bank of England (BoE)

The BoE is the central bank of the United Kingdom, and its actions have the single biggest influence on the value of the pound sterling. Tasked with maintaining financial and monetary stability, the activities of the bank include setting the bank rate, targeting inflation, as well as implementing monetary policy tools such as quantitative easing.

Reserve Bank of New Zealand (RBNZ)

The RBNZ is the central bank of New Zealand. Its mandate is to promote a sound and dynamic monetary and financial system. The RBNZ releases Monetary Policy Decisions seven times a year and Monetary Policy Statements quarterly. The bank also publishes Financial Stability Reports twice a year. These are highly significant events for the NZD.

Statistics New Zealand

Statistics New Zealand is a government agency tasked with the collection, organization, and publishing of statistics that relate to the economy, population, and society of New Zealand. Important indicators of the agency that can impact the NZD include GDP, Consumer Price index, the Unemployment Rate, as well as Imports and Exports. As well, the New Zealand economy is heavy on agriculture and tourism; so, data on these sectors can have a great impact on the NZD.

GBPNZD Correlations

It is important to establish correlations of any pair that you wish to trade. It helps in avoiding the addition of risk in your portfolio, and it can also help in detecting alternative trade opportunities. The GBPNZD is positively correlated with pairs such as the GBPAUD, EURNZD, AUDNZD, NOKSEK, and ZARJPY. GBPNZD is negatively correlated to currency pairs such as NZDCAD, CHFSGD, AUDSGD, NZDCHF, and NZDUSD.

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