Pound Climbs versus New Zealand Dollar (GBP/NZD) Exchange Rate after UK Meeting Minutes

May 20, 2015 - Written by Ben Hughes

STORY LINK Pound Climbs versus New Zealand Dollar (GBP/NZD) Exchange Rate after UK Meeting Minutes

Pound Broadly Stronger after BoE Minutes

The Pound advanced against a host of other majors including the ‘Kiwi’ after central bank minutes. The highly awaited Bank of England policy report showed that for the second consecutive month, two members of the committee found the decision on whether to vote in favour of immediate interest rate hikes was ‘finely balanced’. The two policymakers in question are likely to be Martin Weale and Ian McCafferty who have voted for borrowing cost increases several times in the past year. Additionally, the bank took on a hawkish tone, suggesting that the Monetary Policy Committee was confident that rates would begin to rise despite being stable at 0.50% since March 2009.

The minutes read: ‘While there was a range of views over the most likely future path for Bank Rate, all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast period.’

UK Inflation Weighs on Sterling

If future minutes reveal a divergence in votes amongst BoE officials, it’s likely that the Pound exchange rate will rally. However, Tuesday had been a disappointing day for the UK economy with the British inflation figures released. The UK saw its non-core Consumer Price Index slip into deflation at -0.1% in April, instead of remaining flat at 0.0% as economists had expected. Additionally, forecasters had pegged the Core CPI gauge to remain stable at 1.0% but inflation surprised again with a dip to 0.8%. However, economists have warned the UK not to panic, as the dip is most likely just a temporary boost to consumer spending.

Economist Ian Stewart stated: ‘Falling prices raise consumer spending power and help keep interest rates low. This looks like the mild and benign variety of deflation, which is good news for consumers and growth.’

Upgraded Growth Forecasts Support 'Kiwi'

Meanwhile, the ‘Kiwi’ exchange rate enjoyed some support on Tuesday when the Reserve Bank of New Zealand announced that it had upgraded its growth forecasts. The central bank has estimated a rise in inflation to 1.85% in the next two years, which would keep it firmly within its 1-3% target range. However, investors are still trying to ascertain whether the RBNZ is likely to cut interest rates again in the near future.

RBNZ Governor Graeme Wheeler recently stated: ‘It would be appropriate to lower the official cash rate if demand weakens, and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.’

Looking ahead, Thursday could be an interesting day for the ‘Kiwi’ with the release of New Zealand Credit Card Spending stats.
UK Retail Sales will also emerge during Thursday’s session.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates New Zealand Dollar Forecasts Pound Forecasts