Pound to New Zealand Dollar Exchange Rate Jumps after BoE News
The Pound to New Zealand Dollar (GBP/NZD) exchange rate hit its best levels in 2 months this morning. More investors bought the Pound (GBP) in reaction to today’s morning Bank of England (BoE) decision, while New Zealand Dollar (NZD) demand remains limited.
Following last week’s surge in GBP/NZD, this week’s movement has been comparatively more modest.
GBP/NZD opened this week around the interbank level of 1.97 and has seen mixed movement for most of the week. The pair generally trended close to the week’s opening levels until this morning, when the Pound jumped.
At the time of writing on Thursday morning, GBP/NZD trended near the interbank level of 1.98. This was the best level for the pair since the beginning of June.
The Bank of England (BoE) held its August policy decision this morning. This is the main focus for Pound investors right now.
Pound (GBP) Exchange Rates Jump on Bank of England (BoE) Forecasts
Due to the UK government’s policy of UK data events taking place at 7am during the coronavirus pandemic, the Bank of England’s (BoE) August policy decision was much earlier today.
As was expected, the BoE left monetary policy frozen. The bank even indicated that it was looking at whether or not negative interest rates would be possible for Britain.
However, despite this the Pound (GBP) ultimately saw a jump in demand following the decision. Sterling found some support from news that the BoE thinks Britain’s Q2 economic slump was ‘less severe’ than feared. According to the bank’s report:
‘The fall in output in Q2 is expected to have been less severe than was assumed in the illustrative scenario in the May Report. In that scenario, it was assumed that restrictions would be gradually unwound between early June and late September, but they were lifted earlier.’
New Zealand Dollar (NZD) Exchange Rate Strength Softens
With fears of a ‘second wave’ of coronavirus infections rising, the New Zealand Dollar (NZD) has been weaker over the past week. The New Zealand Dollar is a currency correlated with risk and trade sentiment, so it has been sensitive to coronavirus developments.
As the Australian Dollar (AUD) outlook is hit by a fresh coronavirus lockdown in the State of Victoria, the ‘Kiwi’ has also been hit. This is due to the close correlations shared by Australia and New Zealand’s economies.
Still, New Zealand’s handling of the coronavirus pandemic has been perceived as fairly optimistic overall. This is keeping the ‘Kiwi’ from falling too far.
For now, there is not much news driving NZD besides strength in other major currencies. New Zealand business inflation expectations saw modest improvement in today’s report but the impact on NZD was limited.
New Zealand Dollar investors are awaiting next week’s Reserve Bank of New Zealand (RBNZ) policy decision.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Gains May Be Limited
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is climbing on Bank of England (BoE) news this morning. However, as investors continue to digest the bank’s statements, Sterling (GBP) could fall again.
The bank has indicated that negative interest rates may be on the table, and also said that Britain was harder hit by the coronavirus pandemic than some rival nations.
As a result of this and speculation of more lockdown for Britain, the Pound is in position to see fresh weakness. The British currency may struggle to hold its ground if market risk-sentiment rises, as this would benefit the New Zealand Dollar (NZD).
If there are any optimistic developments in the global coronavirus outlook, the New Zealand Dollar could see stronger demand.
New Zealand Dollar investors will also be highly anticipating next week, when the Reserve Bank of New Zealand (RBNZ) will hold its August policy decision.
Slews of UK data and of course potential coronavirus and Brexit developments will continue to influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate as well.