GBP NZD Exchange Rate to Trend Lower Ahead of RBNZ Decision

February 7, 2017 - Written by Tim Boyer

STORY LINK GBP NZD Exchange Rate to Trend Lower Ahead of RBNZ Decision

The British Pound to New Zealand Dollar exchange rate continued to trend relatively flatly throughout Wednesday afternoon. While the Pound slipped from its best levels later in the day, the weak ‘Kiwi’ was unable to capitalise.

Demand for the Pound faded ahead of the UK Parliament’s final vote on Article 50, while the New Zealand Dollar remained limp due to a lack of fresh supportive factors.

[Previously updated 08/02/2017]

Ahead of tonight’s Reserve Bank of New Zealand policy decision the New Zealand Dollar has been making modest gains against the Pound.

Worries over Brexit have limited the appeal of Sterling, although any more hawkish comments from BoE Deputy Governor Jon Cunliffe could offer the GBP/NZD exchange rate a rallying point on Wednesday afternoon.

[Previously updated 07/02/2017]

Although risk aversion picked up early in the week this was not enough to bolster the Pound to New Zealand Dollar exchange rate, given the general resurgence in Brexit-based jitters.

Brexit Worries Weighed on GBP NZD Exchange Rate

Investors were not encouraged by the news that MPs had failed to vote through a single amendment to the government’s Article 50 bill during the first day of debates.

This effectively struck out any guarantees of greater influence within the negotiation process for either Parliament itself or the devolved assemblies, barring what consultation Theresa May chooses to accept.

As this suggested that the chances of a hard Brexit are now higher the GBP NZD exchange rate trended lower in response, particularly as the latest Halifax house price data proved disappointing.

If the Article 50 bill passes without amendment this could raise fears that the government has been given an effective blank cheque with regards to negotiations Sterling is likely to come under further downside pressure.

NZD Boosted as Signs Continue to Point Towards More Optimistic RBNZ

The appeal of the New Zealand Dollar picked up in response to the Reserve Bank of New Zealand’s (RBNZ) two-year inflation expectation report, with the forecast raised from 1.7% to 1.9%.

Naturally this boosted market confidence that the RBNZ will opt to take a more optimistic view with regards to monetary policy at its February meeting, shoring up the ‘Kiwi’ even as the mood of market turned generally bearish.

Analysts at Westpac expect that policymakers will maintain a neutral outlook, however, noting:

‘The RBNZ will take some comfort from the fact that inflation is finally back within the target range. But there are still some significant barriers to a further pickup in inflation from here. Rising mortgage rates and a stronger New Zealand dollar mean that financial conditions have already tightened by more than the RBNZ intended.’

So long as the RBNZ avoids any dovish rhetoric the GBP NZD exchange rate is expected to remain on a weaker footing in the short term.

GBP NZD Exchange Rate Forecast: Weaker UK Production Could weigh on Outlook

Sterling could find some support on the back of December’s UK visible trade balance figure, which is expected to show that the deficit narrowed from -12.1 billion to -11.4 billion at the end of 2016.

However, expectations for the latest industrial and manufacturing production figures are not so positive, with a sharp weakening in growth forecast on the month.

If the UK economy does not demonstrate further evidence of its continued resilience to post-referendum uncertainty then the Pound could extend its slide against rivals, with the future still far from clear with regards to Brexit.

Should the NIESR gross domestic product estimate for the three months to January indicate any slowing of momentum the GBP NZD exchange rate is likely to continue its current bearish trend.

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: Currency Predictions Pound New Zealand Dollar Forecasts Po Forecasts