Pound to New Zealand Dollar Exchange Rate Forecast to Weaken on Lack of RBNZ Action

Prospect of BoE Rate Cut Continued to Weigh on Pound (GBP) Demand

Even though there was no change in policy at the Bank of England’s (BoE) policy meeting the Pound (GBP) has remained on a downtrend. While interest rates were kept on hold by unanimous vote, policymakers still left the door open for interest rates to be cut further if the economy proves weaker than data so far has suggested. This more dovish outlook has hampered the Pound to New Zealand Dollar (GBP/NZD) exchange rate despite a general decrease in risk appetite this week.

The New Zealand Dollar (NZD) was shored up, meanwhile, by a solid uptick in the ANZ Consumer Confidence Index, which rose from 117.7 to 121.0. As this suggested that sentiment within the domestic economy has held up in spite of ongoing market uncertainty the ‘Kiwi’ was able to hold onto its gains against the Pound. However, as the US Dollar (USD) has remained on a bullish trend the appeal of the ‘Kiwi’ has been somewhat muted.

GBP NZD Exchange Rate Forecast: RBNZ Seen on Hold at September Policy Meeting

Worries over the outlook of the UK economy are expected to persist for the foreseeable future, maintaining Sterling’s downside bias. August’s public sector borrowing figures are unlikely to offer the GBP/NZD exchange rate a rallying point, with forecasts pointing towards a borrowing deficit of -10.3 billion. This would not do anything to allay the concerns surrounding the robustness of the domestic economy, giving investors further incentive to sell out of the Pound.

Greater volatility for the GBP/NZD exchange rate is likely to stem from the Reserve Bank of New Zealand’s latest policy decision. Imre Speizer, research analyst at Westpac, noted:

‘The 22 September meeting is widely expected to be an on-hold affair, not least because the RBNZ has said it favours moving on MPS dates rather than interim meetings.’

Even so, the ‘Kiwi’ could see some weakness if policymakers prove suitably dovish on the subject of easing. However, given the generally buoyant nature of the New Zealand Dollar even suggestions of another rate cut before the end of the year may fail to have a particularly positive impact on the GBP/NZD exchange rate.