Pound New Zealand Dollar (GBP/NZD) Wavers as Market Turns Cautious
(Updated 17/4/23, 17:00)
The Pound New Zealand Dollar (GBP/NZD) exchange rate continues to trade narrowly as expectations of the Federal Reserve continuing their tightening cycle weighed heavily on market sentiment.
Despite a slew of downbeat economic data releases as of late, the hawkish Fed doesn’t look ready to take its foot off the gas just yet. The probability of the Fed raising interest rates by 25bps has now risen to 84.7%, compared to 78% on Friday. The risk-sensitive New Zealand Dollar could come under increased pressure if relentless interest rate hikes don’t let up.
At time of writing, the GBP/NZD exchange rate is around $2.0022, relatively unchanged from this morning’s opening levels.
Original article continues below…
GBP/NZD Fluctuates as UK Optimism Improves
The Pound New Zealand Dollar exchange rate is trading narrowly as the economic outlook for the UK improves modestly.
At time of writing, the GBP/NZD exchange rate is around $2.0011, relatively unchanged from this morning’s opening levels.
Pound (GBP) Quiet ahead of Key Economic Data
The Pound (GBP) is remaining fairly subdued this morning amid a lack of economic data. With just a speech from Bank of England (BoE) Deputy Governor on the cards for today, the Pound could see muted movement for the day. However, some upbeat forecasts and improving optimism could be buoying GBP investors.
Providing some modest support is the Spring forecast from EY ITEM club. The group predict that the UK economy is finally turning a corner and will rise 0.2% this year. Despite the marginal growth, the upwardly revised forecast comes after EY predicted a 0.7% contraction in its Winter forecast. Hywel Ball, EY’s UK chair, is optimistic over the UK’s economic outlook:
‘While easing, the economy’s challenges haven’t gone away overnight: inflation is still in double-digits and energy prices remain historically high.
‘However, perceptions matter and the fact the economy has been able to outperform expectations could help stir a revival in business and consumer confidence.’
Further providing some modest support to Sterling, was a significant uptick in business confidence. Deloitte’s quarterly poll of CFO’s across the UK has revealed that confidence across top companies in the UK have risen the sharpest since the rollout of the Covid vaccine in late 2020. The recent fall in energy prices have boosted optimism substantially, as well as easing supply chain and recruitment issues.
New Zealand Dollar (NZD) Undermined by Poor Economic Activity
Meanwhile, the New Zealand Dollar (NZD) is remaining relatively quiet amid a cautious mood, and downbeat PMI data. The latest composite PMI for New Zealand revealed the lowest level of private sector activity since January 2022.
Elsewhere, investors are weighing up the prospects for further interest rate hikes from global banks and the potential impact on economic slowdown. With fears of a recession in the US once again surfacing, optimism grew over the Federal Reserve finally pausing their aggressive tightening cycle. Economists now believe a mild downturn is likely for the US, as well as subdued growth.
Pound New Zealand Dollar Exchange Rate Forecast: Easing UK Labour Market to Dampen Sterling?
Looking ahead, the Pound New Zealand Dollar exchange rate could see increased movement with the release of the latest employment data for the UK. If both unemployment figures and employment growth print to forecast, the very tight labour market could show signs of easing. If so, the Pound could slip on pared rate hike expectations.
Meanwhile, the New Zealand Dollar will continue to trade on global market sentiment amid a lack of economic data. The latest GDP and retail sales data from China could impact market moods, as investors gauge the ongoing recovery in the world’s second largest economy after easing their strict Covid measures.