Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises on Optimistic Comments from US Fed Chairman Powell

February 27, 2018 - Written by John Cameron

STORY LINK Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises on Optimistic Comments from US Fed Chairman Powell

Hawkish Fed Powell Testimony Prompts GBP/NZD Exchange Rate Surge

The Pound New Zealand Dollar exchange rate rallied into Tuesday afternoon, supported by a significant drop in demand for the riskier commodity currencies in the wake of the US Dollar’s (USD) surge.

This occurred on the back of US Fed Chairman Jerome Powell’s Congressional testimony in which he revealed optimism for the current state - and future outlook - of the US economy, as well as asserting that the central bank will continue to raise interest rates.

Powell said:

‘Some of the headwinds the US economy faced in previous years have turned into tailwinds. Fiscal policy has become more stimulative and foreign demand for US exports is on a firmer trajectory’.

He also raised some eyebrows when answering questions from the press regarding the possibility of more than three rate hikes this year; asserting that the median projection was three, but that the economy has strengthened and that inflation is moving towards target levels.

Markets construed this to be a possible indication of a forecast change at the next projection in three weeks – an outlook that sent the US Dollar surging, siphoning demand away from the New Zealand Dollar.

New Zealand Dollar (NZD) Exchange Rates Limited by Disappointing January Trade Deficit

The New Zealand Dollar was also limited on Tuesday by a run of rather disappointing ecostats, with New Zealand posting their biggest January trade deficit since 2007.

Statistics New Zealand revealed that the January trade deficit dropped to -566m, down from the previous reading of 596 and the forecast of 0m.

The ‘Kiwi’ Dollar did find some support on remarks from ABS economists, however, with the group asserting that they expect weakness in the trade data to be a fleeting phenomenon, with it expected to narrow as the year progresses.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: Theresa May Brexit Speech on the Horizon

The Pound New Zealand Dollar (GBP/ZND) exchange rate could see more movement this week as markets react to UK Prime Minister Theresa May’s Brexit speech.

Markets are currently expecting May to surmise progress that has been achieved on the Brexit transition front, with traders and businesses hoping for a greater degree of clarity regarding the UK’s post-Brexit trading, and immigration relationship with the EU.

Many impasses remain, however, and ongoing infighting within the Conservative Party regarding whether the UK will stay, or leave the customs union has led to anxieties within the markets that the UK will not be on-track to begin trade discussions in March.

If May reveals that demonstrable progress has been made then Sterling could see even more room to climb.

If Downing Street and Brussels continue to butt heads on aspects of the transition deal, however, then the ‘Kiwi’ Dollar could begin to put the Pound under pressure.

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TAGS: Pound New Zealand Dollar Forecasts