Pound New Zealand Dollar Exchange Rate Tumbles as Market Mood Boosts ‘Kiwi’
A combination of weaknesses in both the Pound (GBP) and US Dollar (USD) has caused the Pound New Zealand Dollar (GBP/NZD) exchange rate to plummet this week. The risk and trade-correlated New Zealand Dollar (NZD) has capitalised on these weaknesses.
After opening this week at the interbank level of 1.94, GBP/NZD briefly attempted a rebound from the previous week’s losses but instead saw even deeper losses.
Throughout the past week, GBP/NZD has plummeted around three cents, even touching on a 2-month-worst of 1.91. At the time of writing, GBP/NZD is trending close to the region of 1.92.
Pound (GBP) Exchange Rates Struggle to Regain Momentum
At the beginning of this week, investors attempted to buy the Pound again after a week of sharp losses. However, the Pound lacked fresh upside momentum, and some analysts predicted that much of the good news around the UK outlook lately had already been priced in.
The latest UK data was largely unsurprising and didn’t give investors much reason to start buying the Pound again either.
As a result of this, the Pound saw fairly mixed movement throughout the week. The Pound outlook was strong overall, but there was simply no fresh upside news for the currency.
This made it more vulnerable to bigger movements in rival currencies. As the New Zealand Dollar saw strong gains, this caused GBP/NZD to face considerably losses.
New Zealand Dollar (NZD) Exchange Rates Capitalise on Dovish Fed Expectations
Speculation that the Federal Reserve could become more hawkish had been a big cause of US Dollar strength in recent weeks.
However, dovish comments from Fed officials combined with largely unsurprising US inflation data has caused much of that bullish speculation to fizzle out over the past week.
Amid much lower expectations of Fed hawkishness, investors were more willing to take risks. The safe haven US Dollar plunged, and currencies like the New Zealand Dollar capitalised.
According to Analysts at ANZ:
‘The Fed is unlikely to do anything to upset the economic momentum, as it wants a very strong economy in order to return to full employment as soon as possible, minimise scarring and push inflation back above 2.0%,’
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Could Be Influenced by Inflation Outlooks
Next week’s UK and New Zealand economic calendars will be a little busier, and could cause movement in the Pound and New Zealand Dollar exchange rates.
Key inflation rate data from both the UK and New Zealand will be published in the middle of the week. These will give markets a better idea of how price pressures are shifting in the coronavirus pandemic.
If price pressures rise considerably, they could boost hopes that the Bank of England (BoE) or Reserve Bank of New Zealand (RBNZ) could be pressured into tightening monetary policy sooner.
Other key UK data to keep an eye on next week includes job market, retail and PMI stats.
Of course, any shifts in coronavirus situations or global market sentiment could also influence the Pound New Zealand Dollar (GBP/NZD) exchange rate.