- ‘Super Thursday’ Boosts Pound – Investors surprised by unanimous BoE
- ‘Brexit’ Could Lead to a Recession – BoE issues warnings
- RBNZ to Hold Off on Cutting Rates? – Decreased bets follow lack of new housing policies
- Forecast: RBNZ Inflation Expectation on Tuesday – Follows UK house prices on Monday
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate fluctuated narrowly on Friday after ‘Super Thursday’ saw both currencies attempting to advance on domestic economic news.
A far cry from its weekly high of 2.1453 on Tuesday, the traditionally volatile GBP/NZD currently trades much closer to the week’s opening levels of 2.1128. At the time of writing, the pair trends flatly in the region of 2.1190.
Pound (GBP) Strengthens on a Unanimous ‘Super Thursday’
The Bank of England (BoE) took part in its fourth ‘Super Thursday’ yesterday, a relatively new event that sees the central bank releasing its quarterly inflation report at the same time as its key interest rate decision and policy meeting minutes.
BoE policymakers agreed unanimously to leave interest rates frozen, a decision which surprised some investors due to an increase in rate cut bets ahead of the EU referendum in June.
Continuous warnings have been issued by the UK government and economists about the potential effects of a ‘Brexit’ on Britain’s economy, with Thursday’s new warnings from the BoE hitting headlines throughout the day.
According to Reuters, Sterling strengthened despite the warning due to a recent decrease in ‘Brexit’ bets among analysts.
‘The Bank of England said Britain’s economy would slow sharply, and could even fall into recession, if the country voted to leave the European Union and said there were limits to what the bank could do about it.
In its starkest warning so far about the impact of an “Out” vote in the June 23 referendum, the central bank said Sterling could fall sharply and unemployment would probably rise.’
‘Brexit’ bets could even decrease further following Friday’s news that the International Monetary Fund (IMF) would join the referendum debate in favour of the ‘Remain’ camp.
The BoE also lowered its growth forecasts for the year from 2.2% to 2.0% due to a recent slowing in output in key economic sectors – however this doesn’t appear to have weighed too heavily on the Pound.
New Zealand Dollar (NZD) Up as RBNZ Rate Cut Bets are Wound Back
Despite Sterling’s hectic domestic news day on Thursday, the risk-correlated New Zealand Dollar was able to hold its ground against a strengthening Sterling despite generally poor risk-sentiment in the foreign exchange market.
This week’s ‘Kiwi’ rally has been due to surprising hawkishness from the Reserve Bank of New Zealand (RBNZ). Released earlier in the week, the RBNZ’s latest financial stability report was expected to introduce new easing measures with the intention of cooling the housing market, but instead reported that the situation would be closely monitored.
NZD strength continued on Friday, following news that the Australian and New Zealand Banking Group (ANZ) is reducing its own RBNZ rate cut bets.
Many economists expected the central bank to mention its intention to cut the key interest rate in its next meeting (on the 9th of June), but bets dropped in response to the news and as a result the ‘Kiwi’ Dollar strengthened.
Scoop reports;
‘The Reserve Bank may hold off cutting interest rates until August rather than moving in June because the economy isn’t looking so bad and it’s tactically better to wait longer, ANZ New Zealand economists say …
ANZ said the economy is “showing very few signs of rolling over”, despite dairy strains and tighter financial conditions, as activity indicators remain “solid” and business and consumer sentiment hold up at “decent” levels. Global financial markets had also improved, with rising oil prices likely to impact near-term inflation and negate the deflationary impact of a higher New Zealand Dollar.’
The New Zealand Dollar is also unlikely to have been dented by fresh retail sales ex inflation data either. While the quarterly print was expected to slow from 1.2% to 1.0%, it instead dropped to 0.8% but this appears to have done little to hurt the ‘Kiwi’.
GBP/NZD Exchange Rate Forecast: UK House Prices, RBNZ Inflation Expectations Ahead
The Pound Sterling to New Zealand Dollar exchange rate may be set to end this week’s session relatively flatly as both currencies remain strengthened by Thursday’s news.
While the ‘Kiwi’ could move on currency cross-flows or shifts in risk-sentiment, the Pound’s movement may not be stirred again until Monday morning, which sees the release of Rightmove’s latest house prices reports.
Tuesday will likely be a busy one for the pair however, as the Reserve Bank of New Zealand (RBNZ) is due to release its 2-year inflation expectation report for the previous 2 quarters. The report could well reflect ANZ’s argument that a June rate cut is unlikely – but could also signal investors to become wary once again.
Later on Tuesday, the latest key British Consumer Price Index (CPI) reports are due for release, followed by May 17th’s Global Dairy Trade auction.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate trends in the region of 2.1190, while the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate trades at around 0.4717.
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