Signs of RBNZ Confidence Drag Pound New Zealand Dollar Exchange Rate Lower
The Pound to New Zealand Dollar (GBP/NZD) exchange rate was knocked off its bullish run in the wake of the Reserve Bank of New Zealand’s (RBNZ) policy announcement.
Investors were caught off guard by the less dovish nature of the central bank’s tone, with subsequent comments from Governor Adrian Orr offering further encouragement.
As Orr expressed a degree of confidence in the health of the New Zealand economy, noting its current strength, the mood towards the New Zealand Dollar (NZD) widely improvement.
Although the decision to leave interest rates on hold once again came as no surprise, with rates not expected to rise in the near future, NZD exchange rates pushed higher across the board.
As the impact of the UK government’s lockdown exit plan announcement began to fade this also limited the potential for further Pound Sterling (GBP) gains.
New Zealand Dollar Looks for Additional Support on Business Confidence Index Uptick
With forecasts pointing towards an uptick in February’s ANZ business confidence index the New Zealand Dollar could make further gains on Thursday.
As long as business confidence continues to tick higher worries over the economic outlook are likely to remain at a minimum.
With the New Zealand economy proving relatively insulated from the ongoing impact of the Covid-19 crisis any fresh signs of strength look set to buoy NZD exchange rates.
However, support for the ‘Kiwi’ could falter if January’s set of trade data fails to impress.
Any narrowing of the trade surplus, or fall into deficit, could weigh heavily on demand for the New Zealand Dollar this week.
With global trade looking set to remain muted in the first quarter a weaker start to the year may cast some doubt over the resilience of the New Zealand economy.
Deteriorating trade conditions could easily drag on the strength of the wider economy, giving investors less cause for confidence in the New Zealand Dollar.
Resilient Nationwide Housing Prices Set to Shore up Pound Exchange Rates
With fresh UK data releases thin on the ground this week the Pound to New Zealand Dollar exchange rate may struggle to find any particular traction.
Even so, the release of February’s Nationwide housing price index on Friday could offer the Pound a degree of support.
Evidence that the UK housing market continued to strengthen this month, in spite of the ongoing national lockdown, could improve confidence in the wider outlook.
As long as the housing market holds up this could help to limit the potential for any first quarter economic contraction, even as worries over the strength of the service sector linger.
On the other hand, any decline in house price growth may keep the Pound to New Zealand Dollar exchange rate on the back foot heading into the weekend.