GBP/NZD Exchange Rate Tumbles as Markets Prepare for First BoE Rate Decision of 2018
The Pound New Zealand Dollar (GBP/NZD) exchange rate tumbled on Tuesday as markets reacted to a surge in global dairy prices. But what can we expect moving forward?
The GBP/NZD exchange rate could encounter increased volatility this week as markets prepare for the Bank of England’s (BoE) first interest rate decision of 2018.
Analysts do not currently expect the central bank to move interest rates from their position at 0.5% at this meeting, though market furore has slowly built regarding the prospect of a rate hike in May.
This has largely been driven by a comments from the bank Governor Mark Carney and the financial services company UBS, with both expecting growth to continue to rise as 2018 progresses as long as Brexit uncertainty diminishes.
The BoE is also expected to release its quarterly inflation report on Thursday, an event that could provide the next impetus.
If the Monetary Policy Committee’s (MPC) statement points to an interest rate hike in May then the GBP/NZD exchange rate will likely rally.
Conversely, a cautious BoE could extend the ‘Kiwi’ Dollar’s lead.
New Zealand Dollar (NZD) Exchange Rate Optimism Rises as Global Dairy Prices Surge
New Zealand Dollar (NZD) exchange rates climbed on Tuesday, bolstered by news that global dairy prices have surged once again.
The latest Global Dairy Trade (GDT) auction has resulted in a boost of 5.9% for the index, with all prices on offer increasing in price on the day.
This marked the third consecutive increase in prices and a maintenance of significant growth in 2018 – with falling production in New Zealand as a result of the drought still cutting supply and driving prices higher.
Looking ahead, however, the New Zealand Dollar could come under pressure after New Zealand’s employment figures are released.
Markets currently expect New Zealand’s unemployment rate to climb from 4.6% to 4.7% in Q4 2017, with average hourly earnings also expected to disappoint by sliding from 1.2% to 0.5%.
This eventuality would bode poorly for New Zealand’s economic future and could limit the potential for hawkish activity at the Reserve Bank of New Zealand (RBNZ).
RBNZ Sets First Official Cash Rate for 2018 – What can Markets Expect for the GBP/NZD Exchange Rate?
The RBNZ is set to announce their rate decision on Wednesday at 20:00GMT, with markets not currently expecting any change in policy.
Whilst growth in New Zealand has been upgraded beyond initial expectations, inflation within the nation surprisingly slowed in 2017 annually from 1.9% to 1.6%, an event that has doused rate hike hopes from the central bank.
In this respect the RBNZ could be set to maintain their neutral policy language in the accompanying statement for this session – an event that could push the GBP/NZD exchange rate back into Sterling’s favour.