Risk aversion was the main driver of the Kiwi last week as stock markets, commodities and higher yielding currencies such as the AUD & NZD suffered as the US Congress initially rejected the $700billion bailout plan in America. Later on Friday Congress voted yes on the bailout plan as widely expected but it looks as though it will take a lot longer to restore investor confidence and therefore improve global risk.

There is very little data of interest from NZ this week and the main ones to watch from the UK will be consumer confidence on Wednesday and the Bank of England interest rate decision on Thursday. There is a slight chance we could see a cut from the BoE this month after poor manufacturing and services data last week but it is more likely that we will see them hold rates for the time being and will see a cut either in November or December.

The relatively new dovish stance from the RBNZ and the uncertainty surrounding the outlook for global growth looks as though they will weigh heavily on the Kiwi for now. We saw a 50 basis points cut in interest rates from the RBNZ last month and expect to see the GBP/NZD cross remain in a higher range of 2.65-2.75, at least until we see the start of monetary easing from the BoE.