Losses in Pound to New Zealand Dollar (GBP/NZD) Exchange Rate despite RBNZ Rate Cut Expectations

Pound to New Zealand Dollar Exchange Rate Tumbling as ‘Kiwi’ Rebounds

The volatile Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has seen mixed movement in recent weeks, and that could be set to continue this week as investors await the Reserve Bank of New Zealand’s (RBNZ) November policy decision.

Due largely to strength in the US Dollar (USD) weakening the ‘Kiwi’, GBP/NZD saw modest gains last week and climbed from the interbank level of 2.01 to just below 2.02 throughout.

However, after briefly touching on the level of 2.02 when markets opened this week, GBP/NZD has since been sliding and is once again trending closer to last week’s opening levels.

The New Zealand Dollar’s (NZD) appeal is limited though. Expectations for an RBNZ interest rate cut on Wednesday, combined with a lack of strong New Zealand data recently, is leaving the ‘Kiwi’ reacting to trade developments.

Pound (GBP) Exchange Rates Avoid Losses as UK Economy Avoids Recession

Following mixed movement from the Pound (GBP) last week, the British currency saw another jump in demand this morning. Rather than fresh Brexit or political hopes though, Sterling gained on news that Britain’s economy had avoided a recession this year.

While it came in slightly lower than the forecast 0.4%, Britain’s Q3 growth rate report printed a rebound of 0.3% showing that Britain’s economy had avoided two successive quarters of contraction.

The Pound was unable to advance against a stronger New Zealand Dollar (NZD) however. The slightly weaker than expected growth, and concerns of continued weakness in UK economic activity, limited the British currency’s appeal.

According to Tej Parikh, Chief Economist at the Institute of Directors:

‘With uncertainty likely to persist and a continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth.’

New Zealand Dollar (NZD) Exchange Rates Rebound Ahead of Expected RBNZ Rate Cut

The Reserve Bank of New Zealand (RBNZ) will be holding its November policy decision this week, and markets widely expect the bank will cut New Zealand interest rates.

Despite this though, the New Zealand Dollar (NZD) is one of today’s best-performing major currencies so far.

This is because the trade-correlated currency is rebounding from days of poor performance. A combination of poor New Zealand job stats and a stronger US Dollar (USD), as well as RBNZ rate cut bets, left NZD tumbling last week.

As the New Zealand Dollar’s advance today are more a rebound than a rally, its potential for gains is limited.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Could Recover on Weak NZ Data

The Pound to New Zealand Dollar (GBP/NZD) exchange rate is falling as the New Zealand Dollar (NZD) benefits from a rebound in demand, but the outlook for the currency remains relatively weak.

The Reserve Bank of New Zealand (RBNZ) is expected to cut New Zealand interest rates from 1.0% to 0.75% on Wednesday. If upcoming New Zealand data disappoints investors, bets for further dovishness from the RBZN will rise, and weaken NZD.

New Zealand visitor arrivals and business inflation expectations will be published tomorrow, with food inflation stats due before Wednesday’s RBNZ decision.

Business PMI data, due Friday, could also influence the New Zealand Dollar if it surprises.

A slew of typically influential UK data is due for publication this week as well, including job stats, inflation, and retail sales.

Unless these are highly surprising though, Pound (GBP) investors may brush over them, and the Pound to New Zealand Dollar (GBP/NZD) exchange rate will be more strongly influenced by UK election developments and New Zealand Dollar movement.

Josh Jeffery

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