The Pound to New Zealand Dollar exchange rate has plummeted in the last week on the latest economic news from the UK, including a package of stimulus measures from the BoE. However, after GBP/NZD plummeted, investors were eager to not let the ‘Kiwi’ advance much further as the week’s key RBNZ meeting approached. After falling from last week’s high of 1.8643, the pair currently fluctuates limply in the region of 1.8220.
Pound (GBP) Undermined by BoE News, Ecostats
Sterling lost a considerable amount of favour last week as the Bank of England (BoE) announced a surprisingly aggressive monetary stimulus package that included room for further potential easing.
Bank officials gave the impression that the package was extremely well planned and intended for the long-term, meaning that Sterling investors are likely to hesitate from buying into the Pound too much for the foreseeable future.
The UK’s latest economic data did little to help. While the figures were from June – before the EU Referendum – manufacturing and trade deficit reports painted a dire picture of Britain’s situation.
Manufacturing production was expected to improve from -0.5% to -0.2% in June, but May’s figure was revised down to -0.6% and the rate of contraction merely lightened to -0.3%.
UK trade deficit figures were also disappointing, worsening from -£2.263bn to -£5.084b in June. However, analysts expect a weaker post-Brexit Pound will lighten the deficit slightly.
New Zealand Dollar (NZD) Fluctuates Ahead of RBNZ Meeting
This is a key week for the New Zealand Dollar, with the Reserve Bank of New Zealand (RBNZ) holding its first meeting since June on Thursday.
Bets of an RBNZ interest rate cut are high, largely owing to a sudden economic assessment report released in late-July by bank officials. As a result, the ‘Kiwi’ Dollar has slumped despite optimistic commodity news from the last week.
This has allowed even the weak Pound to minimise its losses against the ‘Kiwi’. Despite this, Sterling continued dropping against the New Zealand Dollar on Tuesday.
GBP/NZD Forecast: Reserve Bank of New Zealand in Focus
As the week continues the Reserve Bank of New Zealand’s (RBNZ) August policy decision will remain in focus.
The meeting takes place late on Wednesday night – or rather Thursday morning for the Asian session. Analysts expect the bank to cut the overnight rate from 2.25% to 2.00% and hint at what’s next for New Zealand’s economy.
This will be this week’s big mover, so expect investors and the GBP/NZD exchange rate to be reacting to this throughout Thursday.
GBP/NZD may advance slightly if a rate cut occurs and the ‘Kiwi’ falls, but as NZD has already weakened significantly in recent weeks its losses may be priced in to a certain extent – meaning its Thursday losses may not be severe.
New Zealand retail sales and manufacturing figures will be released on Thursday night, which may influence the ‘Kiwi’ Dollar further as the week draws to an end.
Friday’s session will see the publication of UK construction figures for June. As the UK’s construction sector has struggled in recent months, investors do not expect this report to boost Sterling sentiment.