Pound to New Zealand Dollar Exchange Rate (GBP/NZD) Tests Highs Despite Signs of Dovishness from New BoE Policymaker
UPDATE Tuesday 13:08 BST: Broad risk-aversion in markets has left the New Zealand Dollar (NZD) looking unappealing on Tuesday, helping the Pound to New Zealand Dollar (GBP/NZD) exchange rate to trend near its best levels.
This was despite a relatively dovish speech from new Bank of England (BoE) policymaker Jonathan Haskel on Tuesday.
As Haskel will be replacing Ian McCafferty, a relatively hawkish BoE policymaker, this news weighed on Sterling and made it difficult for GBP/NZD to hold its best levels or keep climbing.
Pound to New Zealand Dollar Exchange Rate Climbs as Risk-Sentiment Fades
UPDATE 15:32 BST: The strength in risky commodity-correlated currencies like the New Zealand Dollar (NZD) has proved to be short-lived on Monday.
As risky currencies became unappealing again, the Pound to New Zealand Dollar (GBP/NZD) exchange rate easily advanced in the afternoon.
The weakness in risky currencies came amid fresh US trade jitters, as US company Harley-Davidson announced it would need to move some manufacturing out of the US in order to avoid retaliation tariffs from the EU.
With trade concerns starting to have tangible effects on businesses, investors were a lot less willing to buy risky currencies like NZD.
Investors Hesitant to Move on Pound to New Zealand Dollar (GBP/NZD) Ahead of Major News
Despite last week’s upbeat sounding Bank of England (BoE) and weaker market demand for the US Dollar (USD), the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has seen limited movement this week as investors await more major developments.
Due largely to risk-aversion and BoE hawkishness, GBP/NZD put in solid gains last week and climbed from the interbank level of 1.91 to 1.92.
Since markets opened on Monday though, GBP/NZD movement has been limited and the pair has trended in a tight region near the interbank level of 1.92.
Amid a lack of new economic data supporting Sterling (GBP) trade, investors are hesitant to keep buying the British currency until influential domestic data is published later in the week.
It’s a similar story with the New Zealand Dollar (NZD), with traders awaiting Thursday’s anticipated Reserve Bank of New Zealand (RBNZ) decision.
Pound (GBP) Exchange Rate Strength Limited as Investors Await Growth Stats
The Pound (GBP) outlook saw a notable improvement last week, following the Bank of England’s (BoE) surprisingly hawkish June monetary policy decision.
Bank of England interest rate hike bets for August rose, as the bank continued to show confidence that Britain’s economy was rebounding from the slow performance it had seen at the beginning of the year.
On top of this, more BoE policymakers than expected voted to hike UK interest rates. The vote split was 6-3 in favour of leaving rates frozen, rather than the expected 7-2, as BoE Chief Economist Andy Haldane surprised and voted for a hike.
Those voting for a hike argued that Britain’s economic growth was improving again and that price pressures were strong.
This further bolstered BoE interest rate hike bets, with some analysts even predicting there could be a second interest rate hike towards the end of the year.
However, investors were hesitant to continue pouring into the Pound, as key UK growth data is due for publication at the end of the week.
New Zealand Dollar (NZD) Exchange Rate Traders Anticipated RBNZ Decision
While weakness in the safe haven US Dollar (USD) made investors more willing to buy risky commodity currencies on Friday and Monday, the New Zealand Dollar (NZD) has thus far been unable to benefit.
Last week’s New Zealand data was decent, with Q1 growth meeting expectations, but investors are concerned about how the global trade outlook has impacted New Zealand’s economy.
On top of this, while prices in some major commodities have strengthened, last week saw prices weaken in New Zealand’s most lucrative export commodity, dairy.
As a result, markets are highly anticipating upcoming New Zealand data and Thursday’s Reserve Bank of New Zealand (RBNZ) decision, before making any major moves on the currency.
Pound to New Zealand Dollar (GBP/NZD) Forecast: New Zealand Trade and RBNZ in Focus
Sterling (GBP) trade is unlikely to see a significant shift in movement until Friday when Britain’s Q1 growth results will be published – unless there are any surprising developments regarding the Bank of England (BoE) or Brexit.
BoE Governor Mark Carney will be holding a speech on Wednesday and Chief Economist Andy Haldane will hold a speech on Thursday. If these contain no surprises, GBP/NZD trade may be more influenced by New Zealand news.
Wednesday’s Asian session will see the publication of New Zealand’s May trade balance results, which will give investors a better idea of how much New Zealand trade has been impacted by global trade jitters.
If NZ trade is better than expected, investors are more likely to buy the New Zealand Dollar (NZD) ahead of Thursday’s Reserve Bank of New Zealand (RBNZ) policy decision.
The RBNZ decision will be the biggest NZD news of the week, and is likely to have an impact on the direction of Pound to New Zealand Dollar (GBP/NZD) exchange rate trade if the bank’s tone surprises.