Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as RBNZ Shows Less Willingness to Consider Unconventional Policy

September 26, 2019 - Written by John Cameron

STORY LINK Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as RBNZ Shows Less Willingness to Consider Unconventional Policy

Less Dovish RBNZ Signal Drags Pound New Zealand Dollar (GBP/NZD) Exchange Rate Lower

Fresh comments from Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr saw the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate slump sharply.

As Orr noted that the central bank is ‘unlikely to need unconventional monetary policy tools’ this helped to shore up the New Zealand Dollar against its rivals.

This comment was taken as a less dovish signal, fuelling speculation that the RBNZ may not cut interest rates again in the near future.

With the general sense of market risk appetite also picking up in response to the suggestion that a US-China trade agreement may come sooner rather than later NZD exchange rates saw solid gains.

Political Concerns Keep Pound on Back Foot

The mood towards the Pound, meanwhile, proved negative in the face of another day of political anxiety.

As the increased risk of an early general election continued to hang over the economic outlook support for GBP exchange rates faded further.

With Boris Johnson refusing to stand down markets still see a significant risk of further political disruption in the days to come.

Although MPs voted down an attempt to call a mini-recess for the Conservative Party conference this was not enough to shore up GBP exchange rates on Thursday afternoon.

Negative UK Consumer Confidence Set to Weigh on GBP Exchange Rates

Further losses could be in store for the GBP/NZD exchange rate on Friday as forecasts point towards another negative month for the GfK consumer confidence index.

If the index holds steady at -14 this could fuel anxiety over the outlook of the UK economy, given the significant role consumer spending has played in supporting growth.

Unless the consumer sentiment gauge returns to positive territory the potential for further Pound losses remains.

Even if September’s Nationwide housing price index shows improvement this may not be enough to shore up GBP exchange rates in the face of ongoing political uncertainty.

Extended Business Confidence Decline to Fuel New Zealand Dollar Selloff

Looking ahead to next week, the New Zealand Dollar may come under renewed pressure on the back of September’s ANZ business confidence index.

With forecasts pointing towards the index falling from -52.3 to -58.5 on the month confidence in the underlying health of the New Zealand economy looks set to weaken.

Evidence that businesses are maintaining a generally negative view of the domestic outlook would give the RBNZ greater cause for dovishness, suggesting that a further economic slowdown is likely.

Without a significant improvement from the index the GBP/NZD exchange rate looks set to find a rallying point at the start of the new week.

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TAGS: Pound New Zealand Dollar Forecasts