The Pound to New Zealand Dollar (GBP/NZD) exchange rate has fallen by -0.6% today, following another Bank of England (BoE) interest rate freeze.
This was widely the expected outcome, but the minutes also showed that BoE officials had downgraded their UK economic growth forecasts.
When the next BoE interest rate hike could take place is unclear; some economists are forecasting 2018, while more dovish estimates are for 2019.
(Last updated 10th May, 2018)
Key BoE Interest Rate Vote Risks GBP/NZD Exchange Rate Decline
The Pound (GBP) has made a minor dip against the New Zealand Dollar (NZD) today, ahead of a major meeting of Bank of England (BoE) officials on Thursday.
BoE policymakers will be making their highly-anticipated interest rate decision for May, which is expected to result in another rate freeze at 0.5%.
UK interest rates were cut to 0.25% after the EU Referendum vote in 2016, before being returned to 0.5% in 2017.
Pound traders had previously been forecasting a rate hike to 0.75% as recently as April, but this hope has since faded considerably.
Despite the revised forecasts, there is still the risk of a Pound to New Zealand Dollar (GBP/NZD) exchange rate crash if interest rates are left unchanged.
Is GBP/NZD Exchange Rate Volatility ahead on UK Inflation Rate Data?
Looking further ahead, the GBP/NZD exchange rate is also at risk of fluctuating when UK inflation rate stats for April are released on 23rd May.
Levels of month-on-month and year-on-year inflation are both forecast to rise, which could cause Pound to New Zealand Dollar volatility.
On the one hand, higher inflation would put pressure back on Bank of England (BoE) officials to act and slow price growth by raising interest rates.
On the other hand, given that BoE policymakers didn’t act when inflation was around 3.1% in 2017, a rise to 2.6% may not prompt any immediate action.
New Zealand Dollar to Pound Exchange Rate Forecast: Will NZD/GBP Rise on RBNZ Policy Reveal?
For New Zealand Dollar (NZD) traders, the next event that could trigger an advance will be tonight’s Reserve Bank of New Zealand (RBNZ) meeting.
RBNZ policymakers will reveal whether they have adjusted interest rates, although at present the forecast is for no change from 1.75%.
More influential will be later remarks from RBNZ Governor Adrian Orr.
Mr Orr became head of the RBNZ in March 2018 and NZD traders are looking for signs that he may take an active role in economic management.
When taking over as Governor, Mr Orr revealed that he planned to make reaching ‘maximum levels of sustainable employment’ one of the RBNZ’s objectives.
Economists don’t believe that the next interest rate hike will come until late 2019, but if Mr Orr backs monetary policy tightening then the NZD/GBP exchange rate could rise.
Higher NZ Business Activity could Push New Zealand Dollar to Pound Exchange Rate Up
Another imminent economic event that could support the New Zealand Dollar to Pound (NZD/GBP) exchange rate will be Thursday’s business NZ PMI reading.
Covering April, this is predicted to show a slight rise in levels of business activity during the month from 52.2 points to 55.6.
Higher activity could push the NZD up against the Pound, as previous PMI readings have shown a steady decline since January 2018.
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