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Uptick in GBP NZD Exchange Rate as UK Inflation Prompts BoE Speculation

April 11, 2017 - Written by Ben Hughes

The British Pound to New Zealand Dollar exchange rate looked to put in another day of solid gains on Wednesday, rising to its best levels since September 2016 due to poor demand for risk-correlated currencies.

A lack of fresh New Zealand ecostats and poor news from commodity markets has left investors generally uninterested in the New Zealand Dollar this week.

[Previously updated 11/04/2017]

A weakening in average weekly earnings dented the odds of the Bank of England (BoE) returning to a hawkish bias in the near future.

However, with demand for the New Zealand Dollar limited by persistent risk aversion, the GBP NZD exchange rate largely shrugged off the disappointing data.

[Previously updated 11/04/2017]

The GBP NZD exchange rate rocketed up by nearly a cent today as investors reacted positively to a robust UK Consumer Price Index.

Pound New Zealand Dollar (GBP NZD) Bolstered by Strong Inflation Reading



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The Pound New Zealand Dollar (GBP NZD) exchange rate soared in trading on Tuesday as the Office for National Statistics (ONS) reported that the UK’s inflation rate held at a three-year high of 2.3% in March.
While the later start to the Easter holidays led to a notable drop in air fares this year, dragging on inflation, wth was offset by a surge in food prices as the ONS reported that prices jumped 1.2% last month, its fastest pace in three years.

Traders flocked to the Pound as investors speculated that the Bank of England will begin to tighten monetary policy in order to keep inflation within the bank’s target rate of 2.0%.
However some analysts were concerned that the accelerating pace of inflation this year could lead to consumer spending plummeting in the coming months, especially if the BoE refrains from taking action.

Howard Archer, chief UK and European economist at IHS Markit said;

‘We expect inflation to continue to trend up to reach 3% by the end of the year… This will be uncomfortable for both consumers and the Bank of England. Consumers are facing a serious squeeze as higher inflation is occurring in tandem with muted earnings growth - and this looks set to bite even harder over the coming months.’

New Zealand Dollar Slides as Risk Appetite Plummets



The New Zealand Dollar suffered in trading today as geopolitical tensions cause markets to shy away from riskier currencies like the ‘Kiwi’.

Investors increasingly sought to shelter in safer markets such as the Japanese Yen (JPY) or US Dollar (USD) as concerns grow over the recent US military action in Syria, which has caused US-Russia relations to sour over the last few days.

Meanwhile Trump’s remarks that the US would deal with North Korea with or without China’s help has shaken the Asian markets as the recent missile strikes in Syria has lend more credibility to the presidents threats.

GBP NZD Exchange Rate Forecast: Mark Carney to React to Inflation Figures Tomorrow



The direction of the GBP NZD exchange rate during Wednesday’s session is likely to be largely dictated by the direction of BoE Governor, Mark Carney’s speech tomorrow morning as investors wait to hear his reaction to the uptick in the UK’s inflation rate, with the Pound likely to tumble if he remains nonchalant in his attitude towards the rising inflationary pressure in the UK economy.

Meanwhile the New Zealand Dollar may rally later on Wednesday if New Zealand’s latest Business PMI rises from 55.2 in March as some economists predict.

Current Interbank Exchange Rates



At the time of writing the GBP NZD exchange rate was trending around 1.79 and the NZD GBP exchange rate was trending around 0.55.
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