Comments from Bank of England (BoE) Governor Mark Carney prompted the Pound to slump sharply, with the odds of a return to tighter monetary policy weakening.
Unsurprisingly, Carney maintained a more dovish outlook, noting that now was not the time for interest rates to rise from their historic lows.
The balance of the Monetary Policy Committee (MPC) now looks set to lean more towards the doves with the appointment of economics professor Silvana Tenreyro, who will replace prominent hawk Kristin Forbes at the end of the month.
As a result the BoE is likely to remain on hold for the foreseeable future, limiting the appeal of GBP exchange rates at this juncture.
While formal Brexit negotiations appeared to get off to a solid enough start the process is likely to remain a drag on Sterling for some time to come.
If the atmosphere shows signs of souring, and the UK government maintains a hard line of rhetoric, the Pound New Zealand Dollar exchange rate could shed further ground in the coming weeks.
However, while concerns over the outlook of the domestic economy will remain until the final shape of any Brexit deal becomes clear, Sterling could find a rallying point on the back of any positive domestic data.
Should the economy continue to demonstrate signs of slowing growth, though, the appeal of the Pound is likely to remain decidedly limited.
NZD Volatility Expected Ahead of RBNZ Rate Decision
The mood towards the New Zealand Dollar, meanwhile, picked up in the wake of better-than-expected consumer sentiment figures.
June’s ANZ consumer confidence index leapt 3.1% on the month, signalling that a greater sense of optimism is taking hold within the domestic economy.
This helped to bolster demand for the ‘Kiwi’ ahead of the latest Reserve Bank of New Zealand (RBNZ) interest rate decision, although the antipodean currency could struggle to hold onto its bullishness for long.
Expectations are not particularly high for the RBNZ meeting, as Imre Speizer, research analyst at Westpac, noted:
‘Developments since the May MPS have been net neutral, stronger export prices and fiscal policy offset by weaker GDP and house prices. We expect the policy guidance paragraph to be unchanged.’
If policymakers take a more hawkish view on the economy, however, this could encourage investors to pile into the New Zealand Dollar.
With the chances of another Federal Reserve interest rate hike looking a little more limited the appeal of the commodity-correlated ‘Kiwi’ is likely to remain buoyed, particularly if US data continues to generally disappoint.
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