Pound New Zealand Dollar Exchange Rate Stumbles in Wake of RBNZ Rate Hike
The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading on the back foot this morning as markets digest the Reserve Bank of New Zealand’s (RBNZ) hawkish interest rate hike.
At the time of writing the GBP/NZD exchange rate is trading at around NZ$2.0033, down roughly 0.6% from this morning’s opening rate.
New Zealand Dollar (NZD) Bolstered by RBNZ’s Hawkish Rate Hike
The New Zealand Dollar (NZD) is striking higher against the Pound (GBP) and the majority of its other peers this morning.
This uptick in NZD exchange rates follows the conclusion of the RBNZ’s latest policy meeting, in which it raised interest rates from 0.75% to 1%.
While the RBNZ’s third consecutive rate hike was largely priced in by markets, the bank adopted a more hawkish tone in its forward guidance than investors had expected. With expectations the RBNZ could raise interest rates to 2.5% within the next twelve months, fueling the New Zealand Dollar’s accent.
Chris Turner, Global Head of Markets at ING, comments:
‘The RBNZ delivered a widely-expected 25bp rate hike but surprised on the hawkish side by revising its rate-path projections significantly higher. The policy rate is now expected to rise from the current 1.0% to 2.5% over the next 12 months and is set to peak at 3.25% in 2023.
‘This confirms how the RBNZ is set to remain the most hawkish central bank in the G10 space, a factor that in our view will offer New Zealand Dollar some good support in the medium term.’
Turner suggests the ‘Kiwi’ could still face some downside risks in the short-term. Warning that ‘ geopolitics and unstable risk sentiment in the run-in to Fed tightening’ could see the New Zealand Dollar shed some of its RBNZ-led gains.
Pound (GBP) Muted ahead of BoE Testimony
At the same time, the Pound (GBP) is currently struggling to find any strong directional bias this morning.
This comes ahead of Bank of England (BoE) Governor Andrew Bailey’s testimony in front of a parliamentary committee.
Bailey will be quizzed on the BoE’s monetary policy and how the bank plans to bring inflation back under control. This could bolster the Pound if he reinforces expectations the BoE will continue to hike interest rates in March and beyond.
Pound New Zealand Dollar Exchange Rate Forecast: Ukraine Crisis to Trigger NZD Selling Bias?
Looking ahead to the second half of the week, with the Ukraine crisis set to continue to dominate headlines, it’s likely we will see market risk appetite act as the driving force behind the Pound New Zealand Dollar exchange rate.
Analysts are warning markets are overpricing the chances a diplomatic solution could still be found. Should the situation continue to deteriorate the New Zealand Dollar is likely to reverse some of its recent gains.
The publication of the Confederation of British Industry’s (CBI) distributive trades index may influence GBP exchange rates in the meantime. Will a modest drop in retail sales volumes this month exert some pressure on the Pound?