Pound New Zealand Dollar Exchange Rate Fluctuates amid 25bps Rate Hike
(Updated 16:30, 23/3/23)
The Pound New Zealand Dollar (GBP/NZD) exchange rate is recovering from its early slump this afternoon as the BoE met market expectations and raised interest rates by 25bps. Despite many economists believing this could be the final rate hike, a more upbeat assessment of the UK economy cheered investors. BoE Governor Andrew Bailey said of the situation:
‘We were really a bit on a knife edge as to whether there would be a recession… but I’m a bit more optimistic now.’
At time of writing the GBP/NZD exchange rate is trading around $1.9608, relatively unchanged from this morning’s opening levels.
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GBP/NZD Exchange Rate Falls Despite Surging UK Inflation
The Pound New Zealand Dollar exchange rate is tumbling this morning ahead of the Bank of England (BoE) interest rate decision.
At time of writing the GBP/NZD exchange rate is trading around $1.9621, a 0.59% climb from this morning’s opening levels.
Pound (GBP) Undermined by Expected Split Committee Vote
The Pound is experiencing mixed fortunes this morning as investors brace for the latest monetary policy decision from the BoE.
With inflation printing hotter-than-expected yesterday at 10.4%, rate hike bets soared, taking the Pound with it. However, with the banking sector in turmoil, and fears of sky-high interest rates taking their toll on economies, the central bank will be faced with a tough decision.
Expectations of a 25bps rate hike still sit around a 95% probability. And with the Federal Reserve opting to continue their tightening cycle, the BoE could follow suit. It would signal the 11th consecutive interest rate hike from the central bank but could come with a caveat. With collapses in the banking sector caused by a delayed impact from last year’s rate hikes, a more dovish raise could be on the table. Ellie Henderson, Economist at Investec, said of the situation:
‘When deciding the appropriate level of the Bank rate the Monetary Policy Committee (MPC) will have to assess which is the lesser of two evils: the risk of inflation being higher for longer or the current threat to financial stability stemming from the rapidly evolving fears of a banking crisis.’
New Zealand Dollar (NZD) Buoyed by Improving Risk Sentiment
Meanwhile, the New Zealand Dollar is enjoying renewed strength this morning. After the interest rate decision last night, the Fed signalled being close to a pause in their tightening cycle.
Despite an expected 25bps rate hike from the Fed yesterday, Chair Jerome Powell had admitted that a pause was considered. He also gave further reassurances that the banking crisis was under control. Investors noted that hints at further increases were toned down in the accompanying policy statement, paring rate hike bets. With growing expectations of a slowdown in monetary policy market mood improved.
With the Fed seemingly close to the end of their aggressive tightening cycle, the global markets could breathe a sigh of relief. A surge in risk appetite has seen the riskier currencies, such as the ‘Kiwi’, climb.
Pound New Zealand Dollar Forecast: Dovish Hike to Weigh on Sterling?
Looking ahead, the Pound New Zealand Dollar exchange rate could see further movement with the BoE interest rate decision at midday today. Without an accompanying statement or speech, GBP investors will be looking at the vote split for further hints.
Meanwhile, the New Zealand Dollar could hold onto its gains if risk sentiment remains buoyant. However, if the latest US labour market data prints better than expected, Fed rate hike bets could climb back up, denting market moods.