Pound New Zealand Dollar (GBP/NZD) exchange rate softens as Governor Orr strikes hawkish tone
The Pound New Zealand Dollar (GBP/NZD) exchange rate is easing off its recent highs this morning as New Zealand Dollar (NZD) investors digest comments made overnight by Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr.
At the time of writing, GBP/NZD is trading at NZ$2.0742, having sunk by more than 0.2% in the past 24 hours.
New Zealand Dollar (NZD) trends up on bullish sentiment
The New Zealand Dollar is climbing against its peers this morning, buoyed by bullish momentum as traders contemplate Governor Adrian Orr’s recent speech.
During the Asian trading session, Orr emphasised the necessity of maintaining restrictive monetary policy, despite easing inflationary pressures. He added that the economy is performing as expected, and that growth will continue to pick up this year.
Orr also said that policy normalisation is expected to commence in 2025, allaying fears that the bank may withdraw policy stimulus this year.
In response to the speech, the ‘Kiwi’ rebounded from a recent slump, prompted by risk-off sentiment amid geopolitical tensions. Structural challenges in China’s economy had also weighed upon the New Zealand Dollar.
Looking ahead, uncertain political dynamics may still undermine NZD stability as Israel’s attack on Gaza wages on. If the conflict prompts further fractures in international diplomacy, a risk-off mood could send the ‘Kiwi’ spiralling down once again.
Pound (GBP) slumps on central bank uncertainty, risk-off mood
The Pound (GBP) is trending lower against its peers today as investor morale is dampened by uncertainty about the Bank of England’s (BoE) monetary policy outlook.
Hawkish speeches from BoE officials have lent support to the currency in recent days but fluctuating economic conditions – as evidenced by weak business data – continue to cast doubt over the longevity of the bank’s bold standpoint.
Fears over monetary policy divergence also proliferate as it appears that the Federal Reserve bank could maintain restrictive monetary policy for longer than initially anticipated. Following the latest PCE price index from the US, persistent inflationary pressures in the country suggest to economists that the Fed will be forced to adopt a hawkish outlook ahead.
As challenging economic conditions endure for the majority of British households, increased borrowing rates indicate that consumers are struggling. Yet recent estimates maintain that the BoE will maintain interest rates at current levels until August, while the Fed is expected to begin monetary policy easing in June.
Potentially capping losses for Sterling today is a stronger-than-expected manufacturing release. S&P Global’s finalised manufacturing PMI for the month of February exceeded expectations, printing at 47.5 rather than the 47.1 forecast. While still in contraction territory, the move toward expansion suggests a long-awaited recovery in the UK’s manufacturing sector.
GBP/NZD forecast: exchange rate to trade on US stimuli?
The Pound New Zealand Dollar exchange rate could trade this afternoon according to the latest releases from the US, given a lack of economic data from both the UK and New Zealand.
Today’s speeches from Federal Reserve policymakers Lorie Logan, Christopher Waller and Raphael Bostic may shed further light upon the US central bank’s outlook, potentially illuminating the possibility of monetary policy divergence between the Fed and the BoE. If the speakers cast a hawkish tone, pressure will mount upon the UK central bank to match the Fed’s bold rhetoric.