Pound New Zealand Dollar (GBP/NZD) Exchange Rate Fluctuates as Markets Brace for BoE
The Pound New Zealand Dollar (GBP/NZD) exchange rate is wavering ahead of the Bank of England’s (BoE) interest rate decision as poor NZ GDP data caps further losses.
At time of writing, the GBP/NZD exchange rate is around $1.933, relatively unchanged from this morning’s opening levels.
Pound (GBP) is Muted ahead of Interest Rate Hike Decision
The Pound (GBP) remains subdued today as investors eagerly await the BoE interest rate decision. With a 25bps hike expected, a muted reaction can be expected from investors as many feel the central bank is not doing enough to combat inflation.
However, a 50bps rate hike isn’t completely out of the question, although economists at Commerzbank are uncertain on what impact an aggressive hike could have on GBP exchange rates:
‘The BoE is likely to hike its key rate from 1% to 1.25%, with some market participants expecting a 50-bps hike, which cannot be excluded considering high inflation rates of recently 9%.’
‘It is difficult to predict how Sterling is going to react. Is it positive for Sterling if the BoE is hawkish? Or would this fuel concerns of a hard landing and put pressure on sterling? Considering the current market sentiment, I would expect the latter.’
Elsewhere, more political turmoil is piling pressure on the Pound as the fallout from ‘partygate’ continues. Prime Minister Boris Johnson’s ethics adviser has announced his resignation after admitting that Johnson may have broken the ministerial code. Lord Geidt is the second ethics adviser to resign in a span of two years under Johnson.
New Zealand Dollar (NZD) Softens amid Downbeat GDP Data
The New Zealand Dollar is faltering against its peers today as New Zealand’s economy unexpectedly shrank in the first quarter of 2022. GDP data missed expectations and printed at a -0.2% versus a 0.6% forecasted expansion.
However, the pullback in NZD exchange rates has been limited. Economists are confident that the latest poor economic data won’t influence the Reserve Bank of New Zealand (RBNZ) in easing up on rate hikes. With mounting inflationary pressures continuing to weigh on the economy, and the New Zealand Dollar, Kiwibank said:
‘More important is the road ahead. And between weak confidence and a gloomier global backdrop, the outlook for the Kiwi economy has darkened. Growth over the second half of 2022 is looking shakier by the day.’
Economic uncertainty is growing and could weigh heavily on the New Zealand Dollar moving forward.
Pound New Zealand Dollar Exchange Rate Forecast: Dovish BoE Rate Decision to Soften the Pound Further?
All eyes will be on the BoE’s interest rate decision later this morning, as expectations of a rate hike by 25bps could disappoint GBP investors.
The bank’s forward guidance could exacerbate any losses for the Pound. A cautious outlook in light of soaring domestic inflation and stalling growth would likely sap Sterling sentiment.
Elsewhere, the New Zealand business PMI is due to print this evening, with an expected expansion from the previous month. If the data prints as forecast it could provide a moderate boost to the New Zealand Dollar.