Pound New Zealand Dollar Exchange Rate Falters as RBNZ Hikes Interest Rates
The Pound New Zealand Dollar (GBP/NZD) exchange rate is falling this morning, after the Reserve Bank of New Zealand (RBNZ) delivered another rate hike overnight.
At the time of writing, the GBP/NZD exchange rate was trading at around NZ$1.9921, a 0.2% drop from the day’s opening levels.
New Zealand Dollar (NZD) Rallies amid Hawkish RBNZ Action and Risk-On Market
The New Zealand Dollar (NZD) is trading buoyantly this morning as the RBNZ delivered another interest rates hike.
The RBNZ raised New Zealand’s official cash rate (OCR) by 50bps to a seven-year high of 3.5%. This is firmly in line with market expectations, with NZD investors reacting positively to the bank’s hints of further rate hikes.
A statement released by Senior Adviser James Weir stated:
‘Committee members agreed that monetary conditions needed to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1 to 3% per annum target range. The Committee remains resolute in achieving the Monetary Policy Remit.’
In conjunction with RBNZ’s commitment to taking as much action as needed to control inflation, the risk-on market mood that has continued from trading sessions earlier in the week has prompted the risk-sensitive ‘Kiwi’ to shore up against its peers.
Pound (GBP) Mixed as Markets Calm Following Turbulence
The Pound (GBP) is seeing a mixed trading session this morning, as the markets calm following Sterling’s significant rally earlier in the week.
While GBP continued its recovery from previous lows yesterday, the currency has now lost momentum following a clarification on the release of the UK Government’s fiscal statement, following confused messaging. Investors remain cautious because Chancellor Kwasi Kwarteng has stated a November release, the BBC reports that it may be brought forward.
Similarly, UK bond yields have begun rising again after the Bank of England (BoE) announced they hadn’t purchased any in the last few days, weighing on the pound.
Furthermore, today’s UK PMI release showed a revised figure of 50 up from 49.2, showing the service sector exhibited no growth. This contributes to the pessimistic outlook for the UK Economy as one of its key pillars begins to stall.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: Sterling to Remain Mixed as Services PMI Expected to Disappoint
Looking ahead, the Pound New Zealand Dollar (GBP/NZD) exchange rate may remain dipped as today sees Prime Minister Liz Truss due to give a speech in the afternoon.
As such, further commentary on government policy may be on the cards, but the outlook remains uncertain for Sterling.
More PMIs are expected through the week for the UK, with minor contractions predicted for construction, which may further dent Sterling.
For New Zealand, it remains to be seen if the risk-on mood of the market will continue. Data is scarce for the rest of the week, meaning the ‘Kiwi’ is beholden to wider market movements.