Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rallies as Market Mood Suffers

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rallies as Market Mood Suffers

(Article updated 15:30, 14/4/23) The Pound New Zealand Dollar (GBP/NZD) exchange rate is on the march this afternoon. Following a disappointing turn from US retail sales data, but a rise in American consumer confidence, investors are flocking to the safe-haven US Dollar.

As such, the risk-sensitive ‘Kiwi’ is beginning to struggle for support, prompting investors to favour Sterling.

Furthermore, hawkish Federal Reserve comments have opened the door for further tightening. With the world’s largest economy in a precarious position, the mood is souring as concerns grow over the global economy.

At the time of writing, GBP/NZD is trading at around NZ$1.9973, a rise of roughly 0.5% from the morning’s opening rates.

Original article continues below:

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Narrows as NZ Manufacturing Index Disappoints

The Pound New Zealand Dollar exchange rate is trading narrowly this morning, following the release of BusinessNZ’s latest manufacturing index.

At the time of writing, GBP/NZD is trading at around NZ$1.9883, showing little movement from the morning’s opening rates.

New Zealand Dollar (NZD) Undermined by Disappointing Manufacturing Contraction

The New Zealand Dollar (NZD) is being undermined this morning as markets continue to digest the latest BusinessNZ PMI result.

Printing at 48.1, the index indicates that the manufacturing sector had entered a contraction in March. Because of this, jitters over the New Zealand economy are countering bullish trade, keeping the ‘Kiwi’ muted.

Craig Ebert, Senior Economist at BusinessNZ, commented:

‘Disappointing as New Zealand’s March PMI was, it wasn’t especially negative in longer-term context. Neither was it much out of line with manufacturing readings across the world of late.’

However, recent indications that the Federal Reserve are nearing the end of their tightening cycle may be cushioning NZD.

The prospect of less rate hikes from the world’s largest economy is inspiring optimistic trade. As a risk-sensitive currency, the ‘Kiwi’ is likely benefitting from this.

Pound (GBP) Muted amid Lacking Data Calendar

The Pound (GBP) is seeing limited trade this morning, as a lack of impactful data releases saps sentiment towards Sterling.

As such, it appears that investors are seeking other investment opportunities. GBP may largely be trading on dynamics with other currencies.

However, underpinning Sterling could be continued interest rate hike bets. Following a speech yesterday afternoon from Bank of England (BoE) Chief Economist Huw Pill, markets are anticipating another hike in May.

Chris Turner, Global Head of Markets at ING, explained:

‘That suggests Pill may not be shifting into ‘pause’ mode when it comes to monetary policy. Here financial markets now price an 80% chance of a 25bp BoE hike on 11 May.’

However, markets further anticipate this to be the last hike in the BoE’s current tightening cycle. A lack of clear forward guidance is keeping these bets, and Sterling, relatively muted.

GBP/NZD Exchange Rate Forecast: UK Labour Data in Focus

Looking ahead to early next week for the Pound, the core catalyst of movement is likely to come on Tuesday.  February’s unemployment rate is scheduled to print, and is forecast by economists to edge upward to 3.8%.

If this prints in line with expectations, Sterling could weaken as it would point to signs of a cooldown in the UK labour market.

Furthermore, the latest wage growth data is expected to show a fall. This could lead to a further paring back of rate hike bets, weighing on GBP.

For the New Zealand Dollar, there’s a lack of short term data releases at the start of the week. As such, the ‘Kiwi’ may trade on its relationship with the Australian Dollar.

Early Tuesday, the Reserve Bank of Australia (RBA) are due to release their latest meeting minutes. If these take a hawkish stance, AUD could rise and bring NZD upwards alongside it.

John Mulcahey

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