GBPNZD Trading Guide: How to Trade the GBP/NZD

When beginning to trade on the various forex pairs available to CFD traders on Plus500’s platform, learning the intricacies and details of each individual pair can be an effective introduction to this market arena. Let’s take a look at one such pair, GBPNZD:

Understanding the GBP/NZD Currency Pair

This forex pair, as its name suggests, measures the amount of New Zealand dollars needed to purchase one British pound sterling. First, let’s take a background view of the two national currencies that comprise this popular pair as well as of its history:

What Is the British Pound?

The British Pound, also known as GBP or pound sterling, holds a distinguished status as the fourth most-traded currency globally, as of 2022. Its legacy dates back centuries, with origins tracing to 775 AD when it was tethered to the value of silver. Over time, it evolved into one of the most powerful legal tenders worldwide. Moreover, London's position as a major financial centre further solidifies the pound's significance.

Interestingly, the pound's journey includes pivotal moments such as its tie to gold during the 18th and 19th centuries and its role in over 60% of global trade by the start of the 20th century. However, economic shifts, including devaluation due to global conflicts like World War I, led to changes such as pegging to the US dollar in the mid-20th century. Despite these ups and downs throughout its history the pound is still the fourth most used currency worldwide today.

What Is the New Zealand dollar?

The New Zealand Dollar (NZD) emerged in 1967, replacing the complex New Zealand pound. This transition marked a move towards a decimalised currency system, with the NZD divided into 100 cents for simplicity. Prior to this, the pound system was intricate, with 1 pound equating to 240 pence. The NZD's introduction simplified monetary transactions and streamlined financial processes. Initially pegged to the US dollar, the NZD transitioned to a freely floating exchange rate system following the collapse of the Bretton Woods System in the 1970s. As of 2024, the New Zealand Dollar stands as the official currency of New Zealand, alongside several associated territories, and ranks as the tenth most traded currency globally.

The History of the GBP/NZD (British Pound and the New Zealand Dollar)

The GBP/NZD pair, known colloquially as the "kiwi," brings together two currencies with intertwined historical narratives. This cross-currency pairing facilitates direct trading between the British Pound and the New Zealand Dollar, bypassing the need for conversion into US dollars. Such transactions have gained traction among international traders seeking cost efficiency and reduced volatility. Notably, the pair's potential for significant rate fluctuations presents opportunities for speculative endeavours. For seasoned investors, the GBP/NZD pair offers an avenue for diversification away from traditional forex majors. As traders engage with this dynamic pairing, they participate in a market influenced by the rich historical trajectories of both the British Pound and the New Zealand Dollar.

What Is GBP/NZD CFD Trading?

GBP/NZD trading, at its essence, entails the attempt to capitalise on the exchange rate fluctuations between the British Pound (GBP) and the New Zealand Dollar (NZD). This exchange rate reflects the current price at which one British Pound can be exchanged for New Zealand Dollars. For example, if the GBP/NZD pair is trading at an exchange rate of 2.00, it means 2.00 NZD is required to purchase 1.00 GBP.

Traders engaging in GBP/NZD CFD trading speculate on the price movement of GBP/NZD exchange rate without owning the actual currency by executing long or short positions aiming at profiting from changes in this exchange rate and specifically from the difference in the entry and exit price of the position. These fluctuations are influenced by a variety of market factors, including economic data releases, policy differences between the two nations, geopolitical events, and overall market sentiment. Understanding these factors is crucial for making informed trading decisions and effectively managing risks associated with currency volatility.

GBP/NZD trading can offer significant opportunities due to the pair's potential for substantial rate movements but it also comes with inherent risks due to the risky nature of CFDs. It can also be an option for experienced CFD investors looking to diversify their trading portfolios beyond more common forex pairs like GBP/USD or EUR/USD. By closely monitoring market trends and economic indicators, traders may be able to strategically navigate the GBP/NZD market.

Why Trade the GBP/NZD Currency Pair?

If you desire to dip your toe into the pool of forex CFD trading, you may want to consider GBP/NZD CFDs. Firstly, the GBP/NZD pair is known for its volatility, presenting numerous trading opportunities due to frequent price fluctuations, although the potential for significant financial losses must be weighed along with the possible profits. Secondly, it reflects the economic health and monetary policies of two different regions, the UK and New Zealand, allowing trading on macroeconomic trends and news events. Additionally, trading forex CFDs provides leverage, enabling traders to control larger positions with a smaller capital outlay, although the nature of leverage also increases the financial risks.

What Are the Trading Hours for GBP/NZD CFDs?

From any location, you can track GBP/NZD price fluctuations via trading charts in real time and trade CFDs on the pair from the Plus500 platform. GBP/NZD trading is available from Sunday at 10:00 PM CET until Friday at 10:00 PM CET.
However, trading hours may differ on the Plus500 platform.

Factors Affecting the GBP/NZD FX Pair

Similarly to other forex pairs, the GBP/NZD pair can be subject to strong fluctuations depending on various interlocking factors that affect both the British and New Zealand economies as well as those related to the global economy as a whole. Let’s take a look at a few of these:

• Economic Health of the UK and New Zealand: Key indicators include GDP growth, import and export data, employment figures, and inflation rates.
• Political Events: Significant political developments, such as the UK electorate’s decision to leave the European Union in Brexit, can influence the value of the pound.
• Monetary Policies: Actions by the central banks, in this case Bank of England and the Reserve Bank of New Zealand, including interest rate adjustments to control inflation, impact the exchange rate.

How to Trade the GBP/NZD Forex Pair

Trading the GBP/NZD currency pair can take the form of several methods, each with its own advantages. The spot market involves buying and selling currencies at their current prices, with trades typically settled within two business days. This method is straightforward and favoured for its simplicity and immediacy. In the forwards market, traders enter contracts to buy or sell the GBP/NZD pair at a future date and predetermined price, useful for hedging against future price movements. The futures market involves standardised contracts traded on exchanges, specifying the purchase or sale of GBP/NZD at a future date and set price, providing greater transparency and reduced counterparty risk.

One popular way to trade the GBP/NZD currency pair today is through forex CFDs, as mentioned above. A CFD is a financial agreement between a CFD provider and an investor, allowing the investor to speculate on the price movement of the GBP/NZD pair without owning the actual currency. Instead, the investor trades on the price difference between the opening and closing of the contract. Below, we'll look at the steps necessary to get started.

Key Concepts for Trading GBP/NZD CFDs

Some key concepts you may wish to keep in mind when trading GBP/NZD CFDs include understanding the intricacies of the currency pair, leverage, and market factors. The GBP/NZD pair measures the amount of New Zealand dollars needed to purchase one British pound sterling, influenced by the economic health and monetary policies of both the UK and New Zealand. Leverage, an integral facet of CFD trading, allows traders to control larger positions with smaller capital outlays, amplifying both potential profits and risks. Market factors such as GDP growth, employment figures, and political events play crucial roles in exchange rate fluctuations. With CFDs, traders can speculate on price movements without owning the currency, benefiting from bidirectional trading opportunities and leveraging short-term market trends to potentially maximise returns, although losses are always a possibility in this volatile arena. Effective risk management and staying informed with what's going on on the markets, with which reading the articles in our News & Market Insights section can assist, may also be important factors on your trading journey.

Steps to Buy and Sell GBP/NZD CFDs With Plus500

1. Do Your Research: Gain a solid understanding of how the forex market operates, specifically the factors influencing the GBP/NZD pair.
2. Create and Verify Your Plus500 Account: Open an account with Plus500 and complete the verification process to ensure secure trading.
3. Develop Your Trading Strategy: Formulate a robust trading strategy tailored to your goals and risk tolerance.
4. Begin Trading GBP/NZD CFDs with Plus500!

Conclusion

Trading the GBP/NZD currency pair via CFDs on Plus500 can offer a dynamic way to take part in the global forex market, but understanding the historical and economic contexts of both the British Pound and the New Zealand Dollar is essential for informed trading. The GBP/NZD pair's volatility presents numerous opportunities, though it also requires careful risk management. By leveraging the flexibility and bidirectional trading capabilities of CFDs, traders may be better-placed to assess the potential benefits as well as ever-present risks associated with trading this important forex pair.

FAQs

What affects the value of the GBP/NZD Forex Pair?

The value of the GBP/NZD Forex pair is influenced by economic health indicators, political events, and monetary policies of both the UK and New Zealand, as well as global economic factors.

When should the GBP/NZD be traded?

The GBP/NZD can be traded from Sunday at 10:00 PM CET until Friday at 10:00 PM CET on the Plus500 platform*.
*Trading hours depend on the operator.

What are the different ways to trade the GBP/NZD Forex pair?

Different ways to trade the GBP/NZD Forex pair include spot trading, forwards contracts, futures contracts, and CFDs, each with its own advantages and methodologies.

How can I start trading the GBP/NZD?

To start trading the GBP/NZD, open and verify a Plus500 account, educate yourself about the Forex market, develop a trading strategy, and begin trading.

How Do You Analyse the GBP/NZD?

You can analyse the GBP/NZD by monitoring economic data releases, interest rate differentials, geopolitical events, and overall market sentiment.