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Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Flat as BoE Warns Against Further Brexit Chaos

Bank of England

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Left Muted as BoE Leave Rates on Hold

UPDATE: The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained muted and the pairing is currently trading around NZ$1.9729.

As expected, the Bank of England (BoE) voted unanimously to leave interest rates on hold at 0.75%.

In the bank’s statement, it revealed that while the UK is not likely to fall into recession during the current quarter, a further Brexit delay would hurt economic growth.

As uncertainty over Britain’s future has continued to hurt growth, the bank notes that further confusion is likely to hurt the economy.

The BoE noted:

‘For most of the period following the EU referendum, the degree of slack in the UK economy has been falling and global growth has been relatively strong. Recently, however, entrenched Brexit uncertainties and slower global growth have led to the re-emergence of a margin of excess supply.

‘It is possible that political events could lead to a further period of entrenched uncertainty about the nature of, and the transition to, the United Kingdom’s eventual future trading relationship with the European Union.

‘The longer those uncertainties persist, particularly in an environment of weaker global growth, the more likely it is that demand growth will remain below potential, increasing excess supply. In such an eventuality, domestically generated inflationary pressures would be reduced.’

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Flat as UK Retail Sales Slump

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Flat as UK Retail Sales Slump

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained muted and the pairing is currently trading around NZ$1.9743.

Sterling remained steady ahead of this afternoon’s Bank of England (BoE) interest rate decision.

The BoE is expected to leave rates unchanged at 0.75% when it announces its policy at 12:00BST.

Investors are likely to be watching for policymakers’ views on Brexit as well as the outlook for the UK economy which contracted in the second quarter.

Meanwhile, data released this morning revealed British shoppers were cautious in August, spending less money in the run-up to Brexit.

Sales slumped by -0.2% as shoppers spent less money online compared to July when consumers were encouraged to splash out thanks to sales promotions.

New Zealand Dollar (NZD) Muted as Q2 Growth Disappoints

Meanwhile, the New Zealand Dollar was left under pressure as Q2 growth came in lower than expected.

In the three months to June, the economy expanded by 0.5% and annually expanding by 2.1%.

However, the ‘Kiwi’ was left under pressure as the data was in line with a general slowdown in the New Zealand economy.

Commenting on today’s growth data, ASB economist Mark Smith noted:

‘Today’s figures confirmed that NZ economic growth has remained sub-trend over the first half of 2019.

‘Given the evident cooling in New Zealand growth, the 75 basis points of cuts in the Reserve Bank’s official cash rate (OCR) so far this year looked to have been warranted.

‘We will be closely looking for signs that the OCR cuts have gained traction and that growth prospects for the NZ economy are improving.

‘To date, however, signs for the second half of 2019 do not look much better.’

Fed Rate Cut Leaves New Zealand Dollar (NZD) Under Pressure

On Wednesday evening, the New Zealand Dollar (NZD) was left under pressure as the US Federal Reserve slashed interest rates.

Chair Jerome Powell stated that the Fed’s second rate cut in 2019 was ‘to provide insurance against ongoing risks’.

He also added that the US economic outlook was ‘favourable’.

Meanwhile, the risk-sensitive ‘Kiwi’ remained muted as the Bank of Japan (BoJ) kept monetary policy on hold.

The bank also signalled a stronger change of more stimulus as early as its next meeting in October as it issued a stronger warning over the risks to the economy.

Commenting on this, Thu Lan Nguyen, Commerzbank currencies analyst, noted:

‘The BoJ did not sound as pessimistic [as expected], they didn’t strongly hint at easing steps to come.’

Pound New Zealand Dollar Outlook: Will a Dovish BoE Leave GBP Under Pressure?

Looking ahead to the Bank of England’s (BoE) interest rate decision, the Pound (GBP) could slide against the New Zealand Dollar (NZD).

If the BoE focuses on recent disappointing inflation data and the likelihood of a no-deal Brexit, Sterling sentiment could be left dampened.

The Pound New Zealand Dollar (GBP/NZD) exchange rate is likely to fall if the bank suggests an easing of monetary policy in the future is necessary.