GBPNZD

Introducing GBPNZD

The GBPNZD currency pair is the combination of two of the most popular currencies in the world. It combines the British Pound from the UK and the New Zealand Dollar from New Zealand. The GBP is the fourth most traded currency worldwide. This makes it extremely popular. The NZD is the tenth most traded currency worldwide. It is still one of the most popular currencies in the industry. Together they form GBPNZD which is a minor currency pair in the forex industry. The reason they’re considered a minor is that they don’t have a high trading volume. What this means is that people don’t trade this currency as much. This is because they’re a cross-currency pair. A cross-currency pair is one that does not contain the USD. This makes them less popular among traders as they usually prefer trading USD which is the standard worldwide. GBPNZD is therefore placed 10^th in the list of most traded minor currency pairs. It is important to note that having a low trading volume makes this pair less liquid. This in turn causes it to become extremely volatile, even during minor hiccups. Therefore, it is recommended to trade these pairs with caution.

The British Pound Sterling

The Pound is the official currency of the United Kingdom, British Overseas Territories, and Crown Dependencies of the United Kingdom. At least eight nations and territories have firmly linked their currencies to the pound sterling. The British pound sterling, sometimes known as the “Quid,” is the world’s oldest currency. It is still one of the most significant currencies today. As early as 775AD, the pound was established as equal to one pound of silver. Following England’s defeat against France in 1694, Pound notes printed by the newly formed Bank of England began to circulate.

In the early 18th century, the pound’s value came to be connected to gold weight rather than silver weight. During World War I, however, the government suspended the gold standard in order to finance its war operations. Following the war, it briefly returned to the gold standard, but the outbreak of World War II forced the country’s currency to be fixed. In the 1970s, the currency fix was broken, and the pound sterling is now a freely floating currency.

The New Zealand Dollar

In 1967, the New Zealand Dollar, abbreviated as NZD, was formed. Previously, New Zealand’s currency was the New Zealand Pound. The New Zealand Dollar maintained a fixed exchange rate with the US Dollar until 1985. After 1985, they were only allowed to use their own floating rates. Their physical notes have undergone several alterations over the years in order to be more visually appealing while also being more secure.

In 1999, New Zealand changed the composition of its banknotes from paper to polymer and plastic. This was done to make counterfeit notes much simpler to identify. This also makes the notes waterproof and more difficult to disintegrate. Their notes are well-known for having incredibly vivid printing, and they are always improving the design to make it more appealing.

Why Trade GBPNZD

If you tell someone that your preferred currency pair for trading is the GBPNZD, they’ll probably think you’re insane. In reality, most traders adhere to the popular alternatives, which are the major currency pairings that include the USD. When consumers become tired of monitoring the dollar markets all day, they frequently trade in minor pairings. Only a few specialists, however, are aware that these minor currency pairings are where the actual returns reside. There are a few reasons why you would wish to trade these minors, particularly GBPNZD. Here are a few compelling reasons to do so:

Market Correlations

A great reason to trade currency pairs like the GBPNZD is because of their correlations to other assets in the market. This can be seen in the case of the New Zealand Dollar which has great correlations to commodities such as milk, gold, and silver. This is because New Zealand is one of the largest exporters of these commodities. It can also be seen in the case of the British Pound which has great correlations to commodities such as oil and gas. This is because they’re highly involved in the exports of automobiles and their equipment and parts. Therefore, it makes it even simpler to trade this pair as if we understand the direction of the commodities market, we can easily understand the direction of the GBPNZD market as well. We’ll get into more detail later on regarding how exactly these commodities will impact the movement of GBPNZD.

Market Predictability

The market conditions for GBPNZD are rather simple to forecast. This is because they are mostly affected by changes in their respective areas, which are the United Kingdom and New Zealand. Any changes occurring anywhere in the globe would have an influence on a pair containing the USD because USD is utilized as the standard currency for transactions worldwide. Similarly, any changes that occur anywhere in the 28 member nations of the European Union would have an influence on a pair that includes the Euro. As a result, keeping track of every place that may have an influence on a currency pair becomes rather demanding. Forex pairs that are just related to a particular area, such as GBPNZD, are significantly easier to forecast since we only need to evaluate their respective economies.

Market Volatility

GBPNZD can showcase some of the most volatile market conditions in the forex industry. This is due to a couple of factors. The main one is that it has a low trading volume so it isn’t that liquid. This makes it extremely prone to facing instability if there is a slight hiccup in any of the two economies. The second reason why this pair can very often become volatile is that they both have really high interest rates. When both these interest rates clash together, they make the market really unstable. This high volatility can prove to be quite beneficial depending on your trading strategy. Scalping works really well with these market conditions.

GBPNZD Trading Tips

Different currency pairs require different trading strategies in order to trade them the right way. This is because different pairs like the GBPNZD are impacted by different factors which move their markets differently. We need to understand how the GBPNZD market moves in order to be able to trade it successfully. Following are some trading tips for the GBPNZD currency pair:

Scalping

Scalping is a form of day trading strategy where you only execute trades that you’ll close at the end of the day. Scalpers often open a BUY and SELL trade of a certain currency at the same time, at the same rate. This allows them to capture the market on both sides so they’ll make a profit whichever way the market shifts. The scalping strategy requires no formal training or any knowledge on market analysis. It is therefore a popular strategy among beginners in this industry. Even professionals use this strategy as it is an efficient way of making quick profits. GBPNZD can get quite volatile due to having less liquidity. Volatile market conditions are ideal for scalping as the market is constantly moving up and down so scalpers make a ton of small profits from both ends.

Trend Trading

Trend trading refers to identifying patterns on the trading charts and using them to execute trades. Identifying an uptrend and downtrend are among the most common patterns that traders look out for. These signify bullish and bearish market conditions. An uptrend is where the highs get higher and lows also get higher. Similarly, a downtrend is where the lows get lower and highs also get lower. You can identify trend patterns just by looking at a chart and so this is a pretty simple trading strategy that is easy to understand for everyone. GBPNZD is known for displaying long upward and downward trends and so this is a great strategy for this forex pair.

Pullback Trading

Pullback trading happens when the market briefly shifts from its trend, allowing you to enter the market at a low cost. When trading a pullback, you must first determine when the market will pull back. If GBPNZD is in an uptrend and momentarily breaks and falls slightly, you have a chance to join the market at a reasonable price with a BUY transaction. Similarly, if the market is in a downtrend and temporarily breaks and climbs significantly, you have an opportunity to enter the market via a SELL trade at a decent price. As a result, this is a basic yet successful approach for the GBPNZD forex pair.

Factors Affecting GBPNZD

As we’ve already discussed above, there are a couple of factors that influence the market movement of currency pairs in the forex industry. These factors vary with each currency and are the entire reason why this market is even able to exist. If every currency pair would be impacted the same, they’d have the same rates at any given moment and the entire market system would fail. Therefore, there are a couple of factors impacting every currency pair. The factors affecting GBPNZD include:

Financial Institutions

Both the Bank of England and the Reserve Bank of New Zealand are majorly responsible for any instability in the GBPNZD marketplace. The BOE and RBNZ release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term.

Any positive results from the BOE will have a positive impact on the GBPNZD currency pair. However, any positive results from the RBNZ will have an inverse impact on the GBPNZD currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the GBPNZD market. From BOE, Andrew Bailey who is the Governor of the institution is highly looked upon for her speeches. From RBNZ, Adrian Orr who is the Governor of the institution is highly looked upon for his speeches.

The Dairy Industry

The GBPNZD currency pair is greatly impacted by any changes to the dairy industry. This is because New Zealand is the largest exporter of whole milk powder around the world. Their economy is largely dependent on the demand for this product. If the demand for this product increases,

GBPNZD would suffer a decrease in value. Similarly, if the demand for this product decreases, GBPNZD will increase in value as New Zealand’s economy will face a decline. We can also look at this from a price point of view. An increase in price for these types of dairy products would decrease the value of GBPNZD and a decrease in price would cause GBPNZD to increase in value.

The Gold Industry

New Zealand has a record for being among the largest exporters of gold in the world. Most of the gold around the world is being received from this tiny island country. Any changes to the demand or price of gold would directly impact the value of NZD which would further impact GBPNZD as well. When gold is in high demand like during wedding seasons in Asia, New Zealand would be exporting more gold which would make their economy thrive. This would therefore make GBPNZD drop in value. Similarly if gold is in low demand, New Zealand wouldn’t be exporting it as much and therefore their economy will suffer. This would make GBPNZD increase in value.

The Transport Industry

The United Kingdom is a major exporter of vehicles and car parts. As a result, their economy is heavily reliant on global demand for these products. Any changes in demand for transportation vehicles will have an immediate influence on the value of the pound. If demand for automotive falls, the UK will not be exporting as many of them, and hence the value of GBPNZD will fall. Similarly, if global demand for automobiles rises, the UK will export them more frequently, and the GBPNZD will rise in value.