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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Drops as RBNZ Shows Signs of Positivity

Pound New Zealand Dollar

Less Dovish Reserve Bank of New Zealand Meeting Fuels Pound New Zealand Dollar (GBP/NZD) Exchange Rate Losses

The Reserve Bank of New Zealand’s (RBNZ) November policy meeting helped to drive the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate sharply lower.

Investors took encouragement from the central bank’s latest comments as it voted to leave interest rates on hold once again.

Although markets had largely anticipated the RBNZ’s decision to remain on hold the relatively positive nature of comments from Governor Adrian Orr saw the New Zealand Dollar (NZD) rally in the wake of the meeting.

As Orr indicated that economic activity in the last few months had proven more resilient than previously anticipated this encouraged bets that the RBNZ may not consider a future interest rate cut.

While the initial wave of market optimism over the positive progress towards a viable Pfizer Covid-19 vaccine began to fade since Monday’s announcement this was not enough to weigh down NZD exchange rates.

Fresh Deadline for Draft Brexit Deal Casts Shadow over Pound Outlook

Even so, Pound Sterling (GBP) found some support against its rivals in spite of lingering doubts over the outcome of ongoing UK-EU trade talks.

With a conference of EU leaders on 19th November apparently viewed as the deadline for a draft Brexit deal the possibility of talks failing to deliver a result remained.

As key issues remain unresolved at this stage there are concerns that the two sides may not reach a deal in time, leaving the possibility of a no-deal scenario on the table.

Given that the UK economy has already come under pressure as a result of its second national lockdown any further threats to the outlook may limit the upside potential of GBP exchange rates.

However, the Pound may find a rallying point on Thursday if the third quarter UK gross domestic product picks up as sharply as forecast.

Confirmation that the UK economy delivered a strong bounce in the wake of the first lockdown’s end may see the GBP/NZD exchange rate trending higher, in spite of doubts over the economic outlook.

New Zealand Manufacturing PMI Contraction Forecast to Dent NZD Exchange Rates

Support for the New Zealand Dollar, meanwhile, could fade in response to October’s Business NZ PMI.

While the manufacturing index delivered solid growth in September forecasts point towards the PMI falling from 54.0 to 46.6 last month.

This would take the manufacturing sector into contraction territory, suggesting that the global Covid-19 crisis had continued to weigh on the New Zealand economy in spite of domestic success in combatting the pandemic.

Focus may also fall on the latest New Zealand good inflation reading, with a higher reading leaving open the possibility of greater RBNZ confidence to come.

Higher levels of inflation would give the RBNZ even less reason to consider cutting interest rates in the months ahead, to the benefit of the New Zealand Dollar.

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