The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was trading in a narrow range on Wednesday but remained close to a one-and-a-half month high as economists await the outcome of tonight’s Reserve Bank of New Zealand (RBNZ) policy meeting.
With a lack of market, moving data releases for both the UK and New Zealand the GBP/NZD currency pair saw little movement. Despite that, the ‘Kiwi’ did find some support from the previous sessions weaker than forecast US durable goods data.
The report increased speculation that the US Federal Reserve may choose to push back hiking interest rates until later in the year or early 2016, such a move would support the New Zealand currency and other commodity and emerging market assets.
‘Sharp increases in the US Dollar and weakness in global markets appear to be hitting the bottom line, with weaker than expected corporate earnings reported by a number of large US companies. While markets are worried lower earnings will feed into cuts to investment spending and layoffs, it is still early dats. Markets await the FOMC later for direction,’ said a senior economist from ANZ Bank New Zealand.
Softer than expected UK Gross Domestic Product data released on Tuesday was not enough to allow the ‘Kiwi’ to push higher as falling commodity prices and concerns over the wider global economy put pressure upon riskier assets.
GBP/NZD Forecast to Rise
The Pound Sterling is forecast to make gains against the ‘Kiwi’ on Wednesday if RBNZ Governor Graeme Wheeler waters down his commitment to his tightening bias. If Wheeler chooses to drop his bias altogether then we can expect the New Zealand currency to drop sharply.
With inflation falling across the globe we cannot rule out a possible interest rate cut by the RBNZ at tonight’s policy meeting.
The majority of economists are forecasting that the central bank will leave rates unchanged but bear in mind that those same economists did not expect the Bank of Canada to cut rates.
If the RBNZ does cut rates then the ‘Kiwi’ will tumble against the Pound and its other major peers.
The US Federal Reserve Bank meanwhile is expected to deliver a ‘steady as she goes’ statement in its policy statement. More dovish rhetoric and the ‘Kiwi’ could inch higher.
