Trading GBP/NZD

Providing a range of opportunities, the GBP/NZD is a popular currency pair for its high volatility and profit potential. It also offers traders a good alternative from the major pairs like EUR, GBP, AUD and NZD against the USD.

This article will discuss the history and outlook of the GBP/NZD’s relative economies, show live price charts and currency graphs and provide a commentary of important indicators and economic ideas that can help form predictions of the GBP/NZD exchange rate.

GBP/NZD Chart

The British Pound Sterling

The GBP, or British pound, is the official currency of the United Kingdom, the South Sandwich Islands, the British Antarctic Territory, the British Overseas Territories of South Georgia and the UK crown dependencies the Channel Islands and the Isle of Man.

As the oldest currency in the world, the history of the GBP stretches back to 760. It was then set as the official UK currency in 1707 when England and Scotland united. The UK dabbled with the gold standard at various times in the 20th century, before abandoning it for the last time in the great depression. The GBP has been a free-floating currency since 1971.

The pound is the fourth most traded currency in the world, after the USD, EUR and JPY, accounting for 13% of the global daily trading volumes. This volume makes it attractive when trading forex pairs such as the GBP/NZD.

The UK economy is the fifth-largest in the world by nominal GDP, hitting USD$2.64 trillion in 2020. The economy’s largest sector is services, particularly financial services, with the sector contributing 80% of the GDP. The interest rates and monetary policies for the GBP are set and managed by the Bank of England (BoE). The UK is one of the biggest exporters and importers in the world, with the USA, Germany and France sitting as its top trading partners.

The New Zealand Economy

The New Zealand Dollar (NZD) is the official currency of New Zealand, the Ross Dependency, Niue, the Cook Islands, the Pitcairn Islands and Tokelau.

The NZD, often called the ‘kiwi’, came into being in 1967, when New Zealand decimalised the former New Zealand pound and pegged its new currency to the US dollar. In 1985, the NZD became a free-floating currency.

The NZD is the tenth most traded currency by daily volume, on average accounting for 2.1% of daily trade volumes. The GBP/NZD is one of the most traded forex pairs including the New Zealand dollar.

The New Zealand economy is a much smaller economy than that of the UK, reeling in a GDP of US$0.196 billion in 2020. The economy is comprised of a services sector accounting for 65.2% of GDP, an industry sector of 20.4% and agriculture of 5.8%. Interest rates and policy decisions are set by the Reserve Bank of New Zealand (RBNZ). New Zealand’s main trading partners are China, Australia and the USA.

GBP/NZD Economic Influences

A deep well of information that can help inform trading strategies and the prediction of price fluctuations exists in the form of economic news. Many reports, statistics and figures that influence GBP/NZD rates are released regularly by official bodies. These reports often follow specific indicators and economic concepts.

Economic Growth

The health and performance of an economy are going to influence the performance of that economy’s currency. Generally, the difference in economic output between the two currencies in a pair is what drives movements in exchange rates. For example, if the UK economy vastly outperforms New Zealand’s, then the GBP will likely strengthen against the NZD.

The health and growth of an economy can be indicated by its GDP relative to previous reports and years. The UK’s Office for National Statistics (ONS) releases GDP estimates every month and every quarter, with the latter reports containing more data and more sophisticated calculation approaches. New Zealand GDP data and charts are released every quarter by Stats NZ Tatauranga Aotearoa. Keeping an eye on these will help you trade the GBP/NZD.

Inflation

Inflation is a concept that changes the strength of a currency within an economy, with a positive inflation rate meaning a currency can buy less-valuable goods for the same quantity. This influences international exchange rates as the price of goods between countries should remain the same. Therefore, if one economy’s inflation rate is higher than another, then its currency weakening would offset the change in trade prices.

Consumer price indices (CPIs) are a widely used tool to measure the inflation of a currency by comparing the price changes of a basket of common goods. GBP/NZD traders often use a version of a CPI called a core CPI, which excludes more volatile goods like food and energy.

The ONS releases CPI bulletins around the middle of each month. These include price indices, percentage changes and weightings for different inflation measures. Stats NZ releases CPI indicator reports each quarter that show percentage changes and information with helpful summary charts.

Balance Of Payments

The balance of payments is a useful economic tool that measures the amount of capital and goods that enter and leave an economy. While it consists of three accounts, the current account is most used by the forex community as it balances trade payments and incomes between one economy and all the others.

The current account can either be in surplus, which means exports outperform imports, or deficit, which is the opposite. A current account surplus tends to bode well for the strength of an economy’s currency.

Both the ONS and Stats NZ release balance of payments reports every quarter, though Stats NZ also produces a year-end report. Again, these are an important resource when investing in the GBP/NZD.

Consumer Confidence

Consumer sentiment for the future of an economy is measured regularly using surveys. UK and New Zealand sentiment reports are produced by many sources, usually banks or financial agencies.

GBP/NZD analysts will often predict the outcomes of these surveys, providing a basis for price movements. If the reports indicate a more positive sentiment than generally predicted, the strength of that currency will often improve.

Monetary Policies

Monetary policies are implemented by the controlling bank of a currency to improve the performance of an economy. These can indirectly impact GBP/NZD exchange rates.

If two economies have a significant difference in their monetary policies, there is more room for speculation on the relative performance of the two currencies and more volatility may result. Monetary policies are enacted by the BoE for the UK and the RBNZ for New Zealand.

The BoE meets eight times a year to discuss and set monetary policy, releasing a decision at 12:00 GMT on Thursday that week. The RBNZ releases a monetary policy statement each quarter that sets out the policy’s approach and reasoning.

GBP/NZD Correlated Instruments

As there are many interconnected markets and the exchange rates for forex pairs rely on a huge number of factors, there are several markets that correlate quite strongly with the GBP/NZD.

The GBP/AUD and GBP/JPY currency pairs share many of the longer-term trends shown by GBP/NZD, excluding those generated by big economic or political news. Japan and Australia are two of the top trading partners of New Zealand, therefore fluctuations in these currencies can influence those in GBPNZD and vice versa. Live price candlestick charts demonstrate these correlations.

Another reason for correlation in instruments is the heavy reliance on agricultural and commodity exports from New Zealand. This links the price of commodities such as gold to the performance of the New Zealand economy, and therefore the strength of its currency. This positive correlation between gold and the NZD spot rate produces a negative correlation between gold and the GBP/NZD pair, as NZD is the quote currency. Further cause for this correlation is that the AUD is strongly linked to gold and, as before, Australia is one of the top trading partners of New Zealand.

When To Trade GBP/NZD

While forex markets provide the ability to trade currency pairs 24 hours a day and can be attractive for just this reason, it is not always a good idea to trade at any time of day. Trading during times of high liquidity will reduce the spreads (costs) related to your trades, and will often see higher volatility, and therefore potential profits.

The most liquid time for most trades, especially those involving the GBP, is during the London session (07:00 GMT to 16:00 GMT). While the NZD sees some liquidity in the Asian session, the GBP/NZD pair sees much more liquidity in the London session, which is also when UK economic news is released.

How To Trade GBP/NZD

Trading any instrument can be done in an infinite number of ways, with strategies relying on financial news, instinct, geometric relationships or complex combinations of other instruments. Some forex strategies may use 5, 10 or even 20-year GBP/NZD charts, while others may rely on spot rate swings lasting less than a minute. While this is true, some instruments lend themselves better to some methods than others.

Below are two possible trading strategies that use characteristics often exhibited by GBPNZD, though there is no guarantee of success with these methods. Traders should always ensure they fully understand the underlying concepts of a method and the risks involved in any trade.

Swing Trading

There are often clear fluctuations with easily-determined support and resistance levels in GBP/NZD price charts. This manifests as fluctuations between two lines, known as range support and range resistance levels. Traders can identify why such a trend is happening and then use the next support or resistance as an entry point, capitalising on the swing towards the opposite level.

These NZD GBP fluctuations don’t last forever, though, and traders should be careful of breakouts. Breakouts occur when the price is dropping below a support or rises above a resistance level, which can indicate the formation of new levels. Stop orders are useful for this strategy to prevent breakouts and false breakouts cancelling profits.

Carry Trading

Carry trading involves using differences in interest rates to your advantage. It involves borrowing a low interest rate currency to buy a high interest rate one, producing profits from the differential. The NZD is very popular for this method as it is one of the highest-yielding industrialised currencies. Leverage is an important tool to ensure meaningful profits in carry trading. For GBPNZD, this would involve buying NZD with GBP or selling GBP for NZD.

GBP/NZD Brokers

Top brokers like Oanda offer a range of live and historical graphs across 10 years of charts for data investing and daily analysis. All of which can help paint a view of pip values so you can make buy or sell decisions.

Many providers also offer live investing forums where you can exchange ideas with other traders and find the best exchange rate prices. Additionally, look for the brokers offering the best suite of indicators, such as pivot points, on their platforms.

Final Word On Trading GBP/NZD

The GBP/NZD is a strong minor pair that offers traders good levels of volatility from two relatively large and stable economic powers. There are many ways to forecast and bet on the pair in 2025, some not even directly involving the pair, though extra consideration should be given to major economic news and reports.

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