GBP/NZD Exchange Rate Climbs from Low Levels on Dovish RBNZ Decision
The Pound New Zealand Dollar (GBP/NZD) exchange rate climbed to a three-week high this morning as NZD confidence continues to suffer after yesterday’s interest rate decision from the Reserve Bank of New Zealand (RBNZ)
At the time of writing, the Pound (GBP) is trading at NZ$2.0037, steadily rising on this morning’s opening levels.
New Zealand Dollar (NZD) Falls from Four-Week High on RBNZ Decision
The New Zealand Dollar (NZD) drop sharply on Wednesday, as the Reserve Bank of New Zealand (RBNZ) held its interest rate at a record low of 0.25%, defying market expectations.
The New Zealand Dollar maintained this downward trajectory today. The RBNZ decision may encourage markets to take a bearish view until the pandemic recedes: however, policymakers have said they still expect a hike before year-end, which could cap the ‘Kiwi’s’ losses.
The New Zealand Dollar faced additional pressure this morning amidst a souring market mood, as well as concerns by the first local coronavirus outbreak in over six months.
The BBC reported a snap lockdown in New Zealand on Tuesday as a positive Covid case was identified: GBP/NZD trading sentiment was not much altered however, as Prime Minister Jacinda Arden reassured New Zealanders:
‘I want to assure New Zealand that we have planned for this eventuality. Going hard and early has worked for us before.’
Pound (GBP) Firms Despite Slew of Disappointing Data
The Pound has benefitted from the downturn in NZD as it shoots up to a three-week high.
Wednesday’s uptick was accompanied by UK inflation falling just short of expectations at 2%, largely reflecting base effects. Inflation was dragged down by a slowdown in cost of clothing and footwear and a variety of recreational goods and services.
The Pound fell against several of its peers, but was supported against the New Zealand Dollar by the latter’s relative weakness.
Looking ahead, Covid infections are creeping back up in the UK, which could present headwinds for the Pound. The Bank of England (BoE) is not expected to rush into tapering, while tensions over Afghanistan also threaten to dent GBP sentiment.
Tomorrow’s data will see UK retail sales revealed, with figures expected to demonstrate a 0.4% expansion on last month. If the data prints as forecast, the Pound may receive an additional boost.