Pound New Zealand Dollar (GBP/NZD) Exchange Rate Stronger as RBNZ Holds Rates
The Pound New Zealand Dollar (GBP/NZD) exchange rate surged higher last night after the Reserve Bank of New Zealand (RBNZ) decided to leave interest rates unchanged during its policy decision overnight.
At the time of writing, GBP/NZD is trading at around NZ$2.0525, after hitting a nine-day high of NZ$2.0549 last night.
New Zealand Dollar (NZD) Slides on RBNZ Inaction
The New Zealand Dollar (NZD) tumbled last night after the RBNZ left monetary policy untouched for the third consecutive meeting.
The bank opted to leave interest rates at 5.5%, as expected, having delivered its last hike back in May.
The inaction saw NZD exchange rates drop, while mixed comments failed to stem the losses. Although the bank highlighted the fact that inflation remains too high and there are still upside risks, it also said that rates are sufficiently restrictive and the threat of weaker global demand could weigh on the country’s economy.
Nevertheless, the ‘Kiwi’ seemingly entered oversold conditions and managed to claw back some losses, though it remains down during European trade.
Pound (GBP) Firms as Services PMI Beats Estimates
Meanwhile, the Pound (GBP) initially struggled to hold on to its gains against the ‘Kiwi’ as the UK currency continues to face headwinds amid a bleak economic outlook.
Growing evidence that the British economy faces long-term challenges and predictions that the Bank of England (BoE) is done raising interest rates both continue to stifle Sterling’s upside potential.
This morning, however, the UK’s final services PMI for September was revised significantly higher, which seems to be lending the Pound some support.
A preliminary reading saw the index score drop from 49.5 to 47.2, indicating a worrying slump in activity. The finalised score today came in at 49.3.
This upward revision may buoy GBP rates further as the morning progresses, but Sterling could find its gains limited. The new PMI figure is still the weakest in eight months, signalling a contraction in activity and a deterioration compared to the previous month.
GBP/NZD Exchange Rate Forecast: Risk Appetite in Focus
Looking ahead, risk appetite could drive the Pound New Zealand Dollar exchange rate through to the end of the week amid a lack of economic data on both sides. If the recent risk aversion persists then Sterling could climb against the riskier ‘Kiwi’.
One factor that could impact the market mood is upcoming US data. This afternoon, economists expect to see a cooldown in American employment growth and a slowdown in service sector activity. If so, a pullback in Federal Reserve rate hike bets could cheer markets and boost NZD.
However, recently US data has exceeded forecasts. More unexpectedly strong reports from the US could dent the ‘Kiwi’.