Lack of RBNZ Action Weighs on Pound New Zealand Dollar (GBP/NZD) Exchange Rate
The Reserve Bank of New Zealand’s (RBNZ) September policy meeting delivered no particular surprises, failing to offer any boost to the bearish Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate.
As policymakers opted to leave interest rates on hold for the time being, in spite of continued caution over the economic outlook, the mood towards the New Zealand Dollar (NZD) improved.
Commenting on the announcement Dominick Stephens, Chief Economist at Westpac, noted:
‘The RBNZ did say that there was room to cut further “if required.” We interpret this as an easing bias rather than a signal. In other words, the RBNZ views a cut as more likely than a hike, but is not committing to either at this point.’
Even though markets still see high odds of the central bank cutting interest rates again in the coming year this was not enough to weigh down NZD exchange rates for the time being.
Pound Falters as Parliament Returns from Proroguing
Support for Pound Sterling (GBP), meanwhile, diminished as markets braced for the return of parliament.
With MPs reconvening in the wake of the supreme court ruling that the recent prorogation was unlawful the potential for fresh political disruption remains.
As Boris Johnson comes under increasing pressure to resign in response to the ruling the risk of an early general election appears to have increased once again.
GBP exchange rates may struggle to return to a bullish trend in the days ahead as political anxiety persists, casting a shadow over the economic outlook and the chances of positive progress on Brexit.
New Zealand Dollar Vulnerable to Consumer Sentiment Decline
Thursday’s ANZ Roy Morgan consumer confidence index may put a dampener on the New Zealand Dollar if sentiment deteriorates on the month.
Evidence that consumers are still adopting a cautious outlook in the face of global trade concerns and weaker economic data would leave NZD exchange rates exposed to fresh selling pressure.
Unless the New Zealand economy looks set to recover its lost momentum in the months ahead, as RBNZ policymakers would like, the strength of the New Zealand Dollar could quickly fade.
Any fresh decline in global market sentiment could also weigh on NZD exchange rates, with investors showing increasing anxiety ahead of next month’s US-China trade discussions.
Negative UK Consumer Confidence to Limit GBP Exchange Rate Support
With September’s UK GfK consumer confidence index forecast to hold steady at -14 on Friday the potential for a GBP/NZD exchange rate rally appears limited.
Without signs of improving sentiment among UK consumers markets may continue to lack the incentive to support the Pound ahead of the weekend.
As long as political uncertainty and economic weakness continue to dominate the headlines GBP exchange rates look set to remain biased towards the downside.
However, if the index shows an uptick on the month this could encourage the GBP/NZD exchange rate to recover some of its recent losses.