FX round-up: Sterling nosedives against NZ dollar amid Draghi pall

Sterling was mixed against most major crosses this evening and had plunged against the New Zealand dollar as startled traders reacted to that country's central bank holding its key interest rate steady.

At 17:15 BST, sterling was down 0.34% to $1.4455, but gained 0.31% to €1.2768. Against commodity currencies it was mixed -- up on the aussie and rand, down versus the loonie -- but nosedived 2.1% to NZ$2.0268.

Reserve Bank of New Zealand surprisingly held its key rate at 2.25% last night, whereas forex traders had confidently priced in a 25 basis point tightening to 2.0%, which boosted the kiwi Wednesday.

"The (NZ) central bank made it very clear that the door for further easing has been left firmly ajar," said Rabobank Financial Markets Research (RFMR).

"It is fair to say that the poorer tone of the US dollar on the back of last Friday's release of the shockingly weak US non-farm payrolls report has facilitated the rise in the value of NZD/USD in recent session," said RFMR in a research note.

Also at 17:15 BST, the greenback was down 1.67% to NZ$1.4022. Overall the dollar made moderate gains against most major crosses. The dollar-spot index was up 0.42% to $93.983.

Returning to the British unit, sterling's performance has been mired ahead of UK's in-out European Union referendum on 23 June, and reactions to its potential economic consequences whatever the outcome.

This has provoked a flight to safety from perceived riskier investments, pushing UK 10-year gilt yields down 1 basis point to a record low of 1.24% at 17:15 BST, and gold up 0.86% to $1,273.1 an ounce.

"Sentiment is bearish towards the pound and naturally the uncertainty continues to haunt investor attraction which has consequently provided a foundation for bears to install a round of selling," said FXTM research analyst Lukman Otunuga.

"From a technical standpoint, the GBPUSD cut below $1.4500 ... and may be set to trade towards $1.4400," he warned. SwissQuote, chimed in that the cable was amid generally oversold conditions and "the recent pick-up in buying interest pave(s) the way for a rebound."

The British currency received some modicum of support from UK's total trade deficit, which fell to £3.29bn in April from a downwardly revised £3.53bn in March, official data showed. It marked the lowest deficit since September and was better than the predicted £3.55bn.

Sterling's mild rise against the euro was also aided by negative sentiment spawned by European Central Bank president Mario Draghi warning of "lasting economic consequences" of years of weak output.

Speaking at an economic forum in Brussels, Draghi said every effort was needed to be devoted to ensuring productivity was returned to potential.

"The ECB president warning of an 'ageing crisis' in the jobs market, gave little reason for the indices to halt their decline," said Connor Campbell, financial analyst at Spreadex.