Pound New Zealand Dollar Exchange Rate Tumbles as Market Sentiment Rises
Market optimism around the global economic outlook has risen once again this week, boosting risk-sentiment and pushing the Pound New Zealand Dollar (GBP/NZD) exchange rate lower. Investors are a little more hesitant to buy the Pound (GBP).
Last week saw the New Zealand Dollar (NZD) capitalise on Sterling losses and push GBP/NZD lower from 1.9666 to 1.9494.
This week, Sterling briefly attempted to recover some of last week’s losses but has instead continued to tumble against a stronger ‘Kiwi’. At the time of writing on Wednesday, GBP/NZD trends near a fortnight low of 1.9333.
Pound (GBP) Exchange Rates Struggle after Hawkish BoE Official’s Departure
The Pound plummeted last week, as investors took profit from the British currency’s best levels in months.
This week’s Sterling movement has been a little more mixed. The latest UK growth data was stronger than expected and offered the Pound some support, but some surprising Bank of England (BoE) news did weigh on Sterling.
BoE Chief Economist Andy Haldane suddenly announced that he would step down from his roll this summer. This caused concerns that his successor could be more dovish, which weighed on Sterling.
The Pound has been unable to hold against a stronger New Zealand Dollar as a result of this. The data ultimately had little impact on Sterling’s outlook, but it prevented the Pound from making fresh advances.
According to Analysts at ING:
‘The fact that the market pricing of the BoE policy path was largely unchanged yesterday provides a case in point. Plenty of bad news now seems to be priced into GBP’
New Zealand Dollar (NZD) Exchange Rates Benefits from Reserve Bank of New Zealand (RBNZ) Decision
Wednesday’s Asian session saw the Reserve Bank of New Zealand (RBNZ) hold its April policy decision. As was widely expected, the bank left monetary policy frozen and made no significant changes in its tone.
However, the decision also indicated to markets that the bank was less concerned with the strength of the New Zealand Dollar. This led to a rise in NZD demand after the decision.
Despite the bank’s lack of hawkishness, analysts also predict that New Zealand inflation will rise. According to Ben Udy, Australia and New Zealand Economist at Capital Economics:
‘We are more bullish and expect inflation to be above the RBNZ’s target throughout most of the next two years,’
As a relatively risky trade-correlated currency, the New Zealand Dollar has also benefitted from higher market sentiment amid fading Federal Reserve interest rate hike bets.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Investors Await New Zealand PMIs
A lack of key UK data due in the coming days will likely leave the Pound to New Zealand Dollar exchange rate driven more by New Zealand data and global market sentiment.
New Zealand PMI data from March will be published in the coming sessions, with business NZ data due during Friday’s Asian session with services PSI data due on Monday.
Stronger than expected New Zealand PMI data could keep the New Zealand Dollar appealing and cause GBP/NZD to fall even further.
On the other hand, weaker New Zealand data or fresh market risk-aversion could make investors more eager to buy the Pound again instead, which would help GBP/NZD to recover some losses.
Sterling’s outlook is unlikely to change much in the coming days unless there is a surprise in Britain’s coronavirus situation. The Pound will remain fairly appealing otherwise.
Looking ahead, next week’s key data including UK job market and New Zealand inflation stats could also influence the Pound New Zealand Dollar (GBP/NZD) exchange rate.