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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rallies Sharply as BoE Dismisses Negative Interest Rates

September 28, 2020 - Written by Frank Davies

The Pound to New Zealand Dollar (GBP/NZD) exchange rate benefitted from comments made by Bank of England (BoE) deputy governor Dave Ramsden.

As Ramsden talked down the possibility of negative interest rates this offered a rallying point to the Pound, with fears of a potential rate cut fading.

This helped to undo the impact of earlier comments from fellow BoE policymaker Silvana Tenreyo, who had expressed a more positive outlook on the potential benefits of negative rates.

Coupled with a surge in optimism ahead of the latest round of UK-EU trade talks this lifted the GBP/NZD exchange rate to a fortnightly best, even though the two sides are still yet to agree a deal.

Hopes that this final round of discussions could lead to a breakthrough, in spite of everything, gave the Pound a solid boost against its rivals.

New Zealand Dollar Exchange Rates Fail to Capitalise on Chinese Industrial Profits Growth

Another solid month of growth in Chinese industrial profits was not enough to shore up the risk-sensitive New Zealand Dollar, meanwhile.

Although profits leapt 19.1% on the year in August, pointing towards a sustained economic recovery, NZD exchange rates still weakened.

As the New Zealand Dollar had largely defied the decline in risk appetite last week this limited the currency’s ability to capitalise on the stronger Chinese data.

Further weakness could be in store for NZD exchange rates on Wednesday, though, if the latest ANZ business confidence index reading fails to impress.

As long as the index remains deeply in negative territory for September a sense of anxiety over the economic outlook could keep the New Zealand Dollar biased to the downside.

Unless the New Zealand economy can demonstrate signs of resilience in the face of the Covid-19 pandemic the GBP/NZD exchange rate may remain on an uptrend.

Confirmation of Sharp Second Quarter UK Slowdown Set to Weigh on Pound

Even so, the mood towards the Pound may also sour in the days ahead thanks to the release of the finalised second quarter UK gross domestic product.

Confirmation that the economy experienced a significant slowdown of -20.4% on the quarter could limit GBP exchange rates’ ability to gain ground.

Even though no change is expected from the initial growth reading this could still weigh heavily on the GBP/NZD exchange rate.

If the underlying details of the report also point towards greater signs of weakness within the economy a sense of anxiety may see the Pound come under renewed pressure.

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