GPB/NZD Exchange Rate Slips as 60-Day Truce Extension Buoys ‘Kiwi’

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as NZD Benefits from Ease in Global Risk Sentiment

UPDATE: The Pound Sterling New Zealand Dollar (GPB/NZD) exchange rate fell 0.8% this afternoon, and is currently trading at an inter-bank rate of NZ$1.8732.

This morning saw high level talks between US and Chinese officials in an attempt to de-escalate a tariff war ahead of the 1 March deadline.

US Treasury Secretary Steven Mnuchin said he was ‘looking forward to discussions today.’

Hopes were sparked of a possible trade deal being reached between the US and China before the deadline, with rumours US President Trump would extend the truce for further 60 days.

Reports also suggest that Premier Xi Jinping is due to meet Mnuchin and US Trade Representative, Robert Lighthizer tomorrow.

This cooling of global risk sentiment likely aided the risk-sensitive ‘Kiwi’.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slips as US Government Shutdown Risk Diminishes

UPDATE: The Pound New Zealand Dollar (GBP/NZD) exchange rate has remained weak today, with the pairing trading at an inter-bank rate of NZ$1.8893, slipping 1.21%.

This afternoon, reports emerged suggesting that US President Donald Trump will begrudgingly sign a bipartisan border agreement that did not fulfil his wish for a $5.7bn wall.

Further lowering of global risk sentiment likely buoyed the risk-sensitive ‘Kiwi’.

Trump is reportedly ‘not thrilled’ by the legislation with White House Press Secretary, Sarah Huckabee Sanders, saying:

‘But he’s OK because he’s going to get the job done, no matter what […] You can rest assured the President said he was going to build a wall, and he’s going to deliver.’

New Zealand Dollar (NZD) Shoots Higher as RBNZ says it is not Looking to Cut Interest Rates

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate is down sharply by 1.2% and is currently trading at an inter-bank rate of NZ$1.8884.

The slump came after the Reserve Bank of New Zealand (RBNZ) voted to hold NZ interest rates at the record low of 1.75%.

At a press conference Governor of the RBNZ Adrian Orr said that the chances of an interest rate cut have not increased, stating:

‘The answer is no, in that we still see the outlook as balanced to up and down and that is what we have had for the last, at least three, monetary policy statements.

‘What we are saying is that it may stay at this level for longer, based on our current projections, in large part due to that slowing global economic activity.

‘We are very comfortable. We think that the risks are balanced at this point.’

With many traders having priced in a potential rate cut, this unexpectedly ‘bullish’ statement sent NZD sharply higher across the markets.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate under More Pressure as Inflation Hits Two-Year Low

January’s UK Consumer Price Index revealed that inflation had fallen to a two-year low of 1.8%, slipping below the Bank of England’s (BoE) target.

Meanwhile, falling inflation meant that real earnings have effectively risen by roughly 1.5%, with average basic pay rising by 3.3%, offering relief to UK households.

Tej Parikh, Senior Economist at the Institute of Directors stated:

‘For the past two years, households have been squeezed between high prices and weak wage growth. With inflation now at a two-year low and growing upward momentum in pay packets, consumers are less likely to feel less of a pinch on their wallets.

‘This easing in the cost of living should provide some uplift for the High Street just as consumer confidence appears to be waning.’

The Retail Price Index for January also showed slower growth, slipping to a lower-than-forecast -2.5% over a year, and contracting by -0.9% compared to December.

Yesterday: Pound (GBP) Buoyed as Carney Compares UK Economy to ‘Still Fluttering’ Canary

The Pound New Zealand Dollar (GBP/NZD) exchange rate rose over the course of the afternoon following a speech from Bank of England (BoE) Governor, Mark Carney.

During his speech, Carney concluded by saying that ‘Brexit is the first test of a new global order,’ adding that it was an ‘acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability.’

Carney went on to claim that global economic growth will stabilise, although it would be at a newer, and slower pace, with risks such as China’s slowdown threatening this ‘delicate equilibrium’.

Despite Carney’s warning of risks to the global economy, his positive outlook buoyed Sterling, as when questioned whether Britain was ‘the canary in the coal mine for the new world order’, he joked:

‘The bird may be towards the bottom of the cage, but it’s still fluttering.’

GBP/NZD Outlook: Will a Hawkish RBNZ Buoy the New Zealand Dollar?

As there is a lack of further UK economic data releases, Brexit will remain the main catalyst for movement in the Pound New Zealand (GBP/NZD) exchange rate.

Following Prime Minister Theresa May’s statement, tomorrow’s debate and vote may see the Pound rise on the prospect of a soft Brexit.

This evening’s speech from Governor of the RBNZ, Adrian Orr will likely cause further movement, as a hawkish tone would see the ‘Kiwi’ once again rise against Sterling.

Also likely to cause significant movement in the pairing is the ongoing trade talks in Beijing between the US and China.

If there are further signs that an agreement is closer, it could see the risk-sensitive GBP/NZD exchange rate slip as global risk tensions decrease.

Millie Empson

Contact Millie Empson