Pound to New Zealand Dollar Exchange Rate Down on Comments from RBA’s Lowe
Despite broad US-China trade concerns, and bets that the Reserve Bank of New Zealand (RBNZ) could cut New Zealand interest rates again over the next year, the Pound to New Zealand Dollar (GBP/NZD) exchange rate fell last week.
After opening the week at the level of 1.9394, GBP/NZD tumbled on UK political uncertainties and a surprisingly resilient ‘Kiwi’. The pair was able to hold away from its worst levels, but still closed the week lower near the level of 1.9315.
Since markets opened this morning, GBP/NZD has continued to trend with a downside bias. At the time of writing, GBP/NZD was trending closely to the level of 1.9260.
Last week’s Bank of England (BoE) and political news dampened appetite for the Pound, and other Central Bank news has supported the New Zealand Dollar’s (NZD) appeal.
Pound (GBP) Exchange Rates Unappealing as UK Political Uncertainty Persists
Despite the UK Conservative Party leadership contest entering its final stages last week, political uncertainties and how developments could affect the Brexit process have continued to put pressure on the Pound (GBP).
Prominent Brexiteer Boris Johnson is widely seen as the frontrunner to succeed UK Prime Minister Theresa May, and he gained a strong lead in MP votes in the earlier stages of the contest.
The leadership contest will now face a vote from the Conservative Party’s base membership, and the vote is expected to run until the second half of July.
While Johnson is expected to win the contest, his claims that he will aim for a no-deal Brexit if the EU does not renegotiate its deal, as well as fresh controversy over a weekend row between Boris Johnson and his partner, have kept uncertainty high.
New Zealand Dollar (NZD) Exchange Rates Surprisingly Resilient amid Central Bank News
The Reserve Bank of New Zealand (RBNZ) has recently taken a more dovish stance on New Zealand monetary policy, and while a rate cut is not expected at this week’s RBNZ decision, analysts are still speculating interest rate cuts over the coming year.
As a result, the New Zealand Dollar’s (NZD) resilience over the past week may seem a little surprising. This fresh resilience is more due to news from other major Central Banks, as well as recent New Zealand growth data which was stronger than expected.
Expectations for more interest rate cuts from the Fed have made higher-yielding currencies like the New Zealand Dollar more appealing.
On top of this, Reserve Bank of Australia (RBA) Governor Philip Lowe indicated in a fresh speech that the RBA may not cut interest rates much further.
This led to stronger demand for the Australian Dollar (AUD), which in turn supported NZD demand today.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Anticipate RBNZ Decision
With the Pound’s (GBP) recent movement driven by UK political uncertainties, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is more likely to be driven by New Zealand Dollar (NZD) movement unless there are fresh political developments.
Tuesday’s Asian session will see the publication of New Zealand’s May trade balance report, which could be influential if it surprises investors.
However, investors are even more likely to anticipate Wednesday’s Reserve Bank of New Zealand (RBNZ) policy decision and the following press conference.
If the RBNZ mirrors other major Central Banks by taking a more dovish stance on New Zealand’s outlook, the New Zealand Dollar could slump. However, if the RBNZ dials back the dovishness a little, GBP/NZD could be in for further losses.
While the RBNZ will be in focus for NZD movement, the Pound to New Zealand Dollar (GBP/NZD) exchange rate could see a shift if there are any surprising UK political developments in the coming sessions.