Pound Sterling to New Zealand Dollar Flat before BoE Rate Decision

September 15, 2016 - Written by Ben Hughes

STORY LINK Pound Sterling to New Zealand Dollar Flat before BoE Rate Decision

GBP/NZD Exchange Rates Hold Opening Levels ahead of BoE Policy Meeting

The Bank of England (BoE) will announce its latest monetary policy decision soon, keeping Pound Sterling to New Zealand Dollar exchange rates weak in anticipation.

The Monetary Policy Committee (MPC) is expected to make no changes to asset purchases or borrowing costs at this meeting, yet signals of further loosening could be on the way.

Indeed, a Reuters poll of economists found a majority expect November’s meeting will see rates cut to 0.1%, even though the same survey found bets of a recession had dropped from 60% to 35%.

New Zealand Dollar (NZD) Rises in Anticipation of Strong Economic Growth Data

The ‘Kiwi’ failed to trend bullishly after the release of the second-quarter GDP data. The figures disappointed on the previous quarter, with forecasts of 1.1% growth being dashed when the data showed economic expansion only accelerated from 0.7% to 0.9%.

This was still a supportive development, however, made more so by the fact that year-on-year GDP leapt from 2.8% to 3.6% - a two-year high.

ASB Bank LTD Chief Economist Nick Tuffley noted;

‘We believe that the underlying momentum in New Zealand growth lifted firmly over the first half of 2016 and could even be stronger than the second-quarter GDP figures suggest.’

The New Zealand Dollar failed to respond because investors had been confident the forecasts would be met, so markets had already priced in the strong market appreciation.

GBP/NZD Exchange Rate Forecast; Central Bank Action in Focus

Today’s Bank of England policy meeting is expected to see no changes, with interest rates remaining at 0.25% and the asset purchase target remaining at £435 billion.

Although there is plenty of interim data on the calendar, the focus for NZD investors has now turned to next Wednesday’s Reserve Bank of New Zealand’s monetary policy meeting. The RBNZ is struggling with New Zealand’s low rate of inflation; despite the data Nick Tuffley claims;

‘While all this is very encouraging, we continue to expect further rate cuts as the lack of inflation remains the key focus for the Reserve Bank of New Zealand.’

No changes to interest rates, which are currently set at 2.00%, are expected from the next meeting, however. What investors will be looking for are hints from policymakers regarding the possibility of a future cut.

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TAGS: New Zealand Dollar Forecasts