(Updated 16:45 02/02/22)
The Pound New Zealand Dollar (GBP/NZD) exchange rate has steadily climbed throughout the day. The Pound (GBP) has been kept buoyed by hawkish bets ahead of the Bank of England’s (BoE) interest rate decision on 3 February.
At time of writing the GBP/NZD exchange rate is at around $2.0464, which is roughly 0.4% up from this morning’s opening figures.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Ticks Upward as Investors await BoE Decision
The Pound New Zealand Dollar (GBP/NZD) ticked upward overnight but has traded within a narrow range since the opening of the European session. The imminent interest rate decision from the Bank of England (BoE) is likely helping to keep the currency pair propped up.
At time of writing the GBP/NZD exchange rate is at around $2.0390, virtually unchanged from this morning’s opening figures.
Pound (GBP) Muted as Markets Price in 100% Chance of BoE Rate Hike
The Pound (GBP) has remained largely restrained against its rivals today as trading has remained muted ahead of the Bank of England’s (BoE) interest rate decision on Thursday. Further calls for Prime Minister Boris Johnson’s resignation have also likely generated headwinds for Sterling.
With markets now pricing in a 100% chance of a rate hike by the BoE, it’s likely the Pound will climb on Thursday following the meeting. Analysts are anticipating a 0.25% increase to be announced by the central bank as policymakers seek to combat a 30-year high rate of inflation in the UK.
It’s thought that the BoE is preparing for further rate hikes throughout 2022 as prospects of a spike in energy costs, ongoing global supply chain issues, and poor wage growth may continue to weigh on consumer demand GDP growth. The British Retail Consortium (BRC) reported today that shoppers in the UK were hit by the biggest retail price increase in 9 years, which prices in January rising by 1.5%
Sterling is likely to continue to see headwinds from domestic politics today as the ‘partygate’ scandal continues to rumble on. New reports indicate that Johnson did attend the 14 January gathering at 10 Downing Street, one of the many being investigated by the Metropolitan Police. More MPs have confirmed that they have submitted letters of no confidence to the 1922 Committee, as the prospect of a vote of no confidence in Johnson looms.
New Zealand Dollar (NZD) Subdued as Record-Low Unemployment Increases Rate Hike Bets
The New Zealand Dollar (NZD) has shown little movement against many of its rivals today despite a risk-off mood in the markets. Soaring global inflation has meant speculative bets on the currency have been limited as expectations of an interest rate hike by the Reserve Bank of New Zealand (RBNZ) increase.
Calls for rate hikes by the RBNZ are likely to continue as unemployment in New Zealand remained at its lowest level since 2007. Figures released on Tuesday show a fall in the unemployment rate to 3.2% in the third quarter of 2021, representing a furthering tightening of the country’s labour market.
Wage growth was also strong in the third quarter as figures recorded a 0.7% increase. Analysts feel rate hikes are necessary to help cool the country’s ‘overheated’ economy following New Zealand’s series of extensive Covid-19 stimulus measures.
Losses for the ‘Kiwi’ may be limited by soaring dairy prices however, as the global dairy trade price index rose to an eight-year high on Tuesday.
GBP/NZD Exchange Rate Forecast: Will BoE Stick to its Guns?
Looking ahead to the rest of the week, GBP investors will be eagerly awaiting the BoE’s interest rate decision on Thursday with a rate hike highly likely. Ahead of this, a forecast dip in the final reading of January’s Markit services PMI could limit upward movement for the Pound.
With no further significant data for the New Zealand Dollar this week, the currency is likely to be affected by commodity prices and interest rate hike speculation.