GBP/NZD Exchange Rate Forecast to Weaken if Bank of England (BoE) Monetary Policy Outlook Remains Soft
The Bank of England is set to announce its latest monetary policy decisions tomorrow at midday.
The recent trio of disappointing PMIs, which indicated that the UK economy slowed in January, has arrived too late to influence the Monetary Policy Committee (MPC) this time around, but the Bank of England has enough data to contend with as it is.
The UK economy continues to throw out mixed signals, with consumer spending remaining strong but credit and mortgage applications weakening, along with house prices.
The latest inflation data showed that core price growth slowed significantly further-than-expected, which the BoE may use as justification not to pursue higher borrowing costs in the short or medium-term.
It seems unlikely that policymakers will be overly keen on the idea of hiking interest rates any time soon, which could leave the GBP/NZD exchange rate to weaken after tomorrow’s announcement.
Tomorrow will also be what’s known as a ‘Super Thursday’, meaning that the Bank of England will release its latest Inflation Report at the same time as publishing the meeting minutes.
If the report concludes that inflation will continue to weaken from last year’s highs, the likelihood of another interest rate hike this year will drop, taking the Pound Sterling to New Zealand Dollar exchange rate with it.
Dairy Price Surge Boosts New Zealand Economic Outlook, but GBP/NZD Exchange Rate Avoids Heavy Losses
Yesterday’s Global Dairy Trade auction gave the New Zealand economic outlook a significant boost after showing a 5.9% surge in the GDT price index.
The average price per metric ton was taken back above US$3,500 yesterday after the fortnightly event registered its third successive growth, building on a 4.9% increase on 16th January and a 2.2% increase on 2nd January.
Dairy prices have been performing weakly for some months now, so the latest strong uptrend is welcome news for the domestic dairy industry – producer of New Zealand’s most lucrative export commodity.
However, strong market bets of interest rate hikes from the US Federal Reserve over the coming months, following the strong economic data released over the past couple weeks, was hurting market risk appetite yesterday.
New Zealand Dollar Forecast; Will GBP/NZD Weaken as Long-term Monetary Policy Outlook for New Zealand Improves?
An improved outlook for New Zealand’s most important export could improve overall growth projections, increasing the chances of the Reserve Bank of New Zealand (RBNZ) upgrading its monetary policy outlook.
Last night’s strong labour market data could give policymakers further reasons to be confident, as the unemployment rate unexpectedly fell to 4.5% instead of rising to 4.7% as expected, with the employment change rate slowing to 3.7% instead of to 3.6%.
Average hourly earnings growth significantly bettered forecasts during the fourth quarter of 2017, with growth slowing from 1.2% to 0.8% instead of to 0.5% quarter-on-quarter as economists had predicted.
This is yet another strong sign from the economy that could have the RBNZ raising its economic outlook in the future.
The latest dairy and employment data comes too late to influence tonight’s monetary policy decision, but this could mean it provides a cushion against any negativity expressed by the board, should they have decided things are looking gloomier for the New Zealand economy.
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