GBP/NZD Conversion Rate Climbs on Back of Bank of England (BoE) Meeting Minutes
As the impact of Wednesday’s dovish data from the Reserve Bank of New Zealand (RBNZ) has continued to sink in the ‘Kiwi’ (NZD) remains in a slump against many of the majors today. The Bank of England (BoE) September meeting minutes, meanwhile, revealed that the Monetary Policy Committee (MPC) remains generally optimistic and stands by their previous outlook of a near-term take-off to monetary tightening. Proving more hawkish than had been expected, this saw the GBP/NZD exchange rate boosted further, and it continues to uptrend this morning at 2.4532.
A fresh interest rate cut from the Reserve Bank of New Zealand (RBNZ) boosted the GBP/NZD pairing to a five-year high overnight.
UK Manufacturing Production Contraction Softened Pound Sterling (GBP) Conversion Rate as Domestic Trade Deficit Widened
The early week saw the GBP/NZD exchange rate climb to a high of 2.4533 on the back of fresh risk aversion, as Chinese stock markets resumed recent tumbles and the nation’s Imports figure contracted severely. The resultant atmosphere of trader caution weighed heavily on the ‘Kiwi’, particularly ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) Rate Decision and the dovish expectations attached to it. However, the announcement of a ‘circuit breaker’ mechanism to be implemented on the Shanghai index, a measure designed to prevent the occurrence of extreme stock movements, helped to reassure traders and trigger a round of fresh profit taking. This swiftly pushed the GBP/NZD pairing away from its recent high and onto a persistent downtrend.
Yesterday’s raft of UK data proved to be disappointing for the Pound (GBP) as Manufacturing Production contracted to -0.5% and the Visible Trade Balance printed at a larger deficit than had been forecast. Discouraging signs ahead of the Bank of England (BoE) Rate Decision and 12-month Inflation Forecast, this renewed disappointment prompted the GBP/NZD current pair to slump to a low of 2.3959.
RBNZ Decision Sees Interest Rate Cut to 2.75% to Push GBP/NZD Conversion Rate to Five-Year Best
Overnight the RBNZ elected to once again cut interest rates by 0.25% in a move intended to support the weakened ‘Kiwi’ (NZD) against the global slowdown and currency war fears that have weighed on the currency over the past month. While this loosening of monetary policy is likely to benefit the ‘Kiwi’ in the longer term this dovish result, although expected, saw the GBP/NZD pairing surge to strike a new five-year high at 2.4537 as traders jumped ship.
With a general expectation that the Monetary Policy Committee (MPC) will today choose to hold interest rates at their September BoE meeting, Sterling trading has been somewhat cautious this morning. Given recent data bets on the date of a BoE hike have been pushed off into early-to-mid 2016, a prospect which has not overly increased the appeal of the Pound despite advice from business leaders that the economy will ultimately benefit from a longer period of low interest. This dovishness has profited the ‘Kiwi’ though, as the GBP/NZD conversion rate sheds some of its gains in advance of the announcement.
GBP/NZD Exchange Rate Forecast: Bank of England Rate Decision Could Prove Critical for Pairing Today
More movement should be expected once the BoE Rate Decision is published, although the Pound will also remain sensitive ahead of Friday’s 12-month Inflation Forecast. Should policymakers prove more hawkish than pundits anticipate the GBP/NZD currency pair is likely to climb, as any indication of faith in the domestic economy could be a strong rallying point after several recent subpar data releases.
The New Zealand Manufacturing PMI is unlikely to have a particularly noticeable impact in the wake of the RBNZ decision, as indications appear to point to another weak performance. Given the increasingly gloomy picture of conditions in China the chances of further risk aversion eroding the outlook of the ‘Kiwi’ also seem high.
Current GBP, NZD Exchange Rates
At time of writing the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is in a downtrend at 2.4431, with the New Zealand Dollar to Pound Sterling (NZD/GBP) pairing climbing in the range of 0.4091.