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Pound New Zealand Dollar Exchange Rate News: GBP/NZD Stumbles After RBNZ Hikes Interest Rates

February 23, 2022 - Written by John Cameron

GBP/NZD Falling as Reserve Bank of New Zealand Hikes Interest Rates as Forecast

The Pound New Zealand Dollar (GBP/NZD) exchange rate is falling today after the Reserve Bank of New Zealand (RBNZ) hiked interest rates as expected.

At the time of writing, the GBP/NZD exchange rate is trading at approximately NZ$2.0028, down roughly 0.6% from today’s opening levels.

New Zealand Dollar (NZD) Surges in Response to RBNZ Hiking interest Rates

The New Zealand Dollar (NZD) is gaining ground against the Pound (GBP) this morning after the RBNZ hiked interest rates following its latest policy meeting.

As forecast, RBNZ increased interest rates from 0.75% to 1% during the February meeting, its third consecutive hike since November, bringing borrowing costs back to pre-pandemic levels.

NZD soared to a one-month high as the central bank also hinted it will continue to tighten its monetary policy in the near future.

RBNZ also revealed plans to reduce its NZ$50 billion bond holdings via bond maturities and managed sales.

Economists at MUFG Bank said:

‘The OIS market was already implying a policy rate of around 2.50% prior to today’s meeting and the guidance today has encouraged the market to expect an even higher rate as investors remain wary of central banks possibly being behind the curve and having to do more.

‘That will likely keep NZD well supported over the short-term.’

However, the spread of Omicron continues to place pressure on consumer and NZD investor confidence and could limit the ‘Kiwi’s upside potential going forward.

Pound (GBP) Drops Despite Hawkish BoE Comments

The Pound (GBP) is falling against the New Zealand Dollar (NZD) in spite of Bank of England’s (BoE) Governor, Andrew Bailey, delivering a hawkish outlook during today’s meeting.

This morning, Bailey is talking in front of a parliamentary committee about the possible QE direction that BoE may take in the future.

Thus far, Bailey has stated that ‘it's not just wage setting, it's also price setting - it's both’ and that ‘there is very clearly an upside risk [that] comes through from the second-round effects’.

This is supporting GBP investors’ predictions of another interest rate hike at the March meeting in a bid to curve the UK’s current high inflation, and is likely to buoy the Pound’s potential.

Moreover, BoE policymaker, Jonathon Haskel also believes there to be ‘an upside risk to the inflation forecast’ that may result from geopolitical developments.

Meanwhile, Russia’s decision to cross the border into Ukraine is causing pressure on GBP’s appeal as many investors favour safe haven currencies.

GBP/NZD Exchange Rate Forecast: BoE Speeches Take Centre Stage

Looking ahead, the Pound New Zealand Dollar exchange rate may be influenced by any additional comments made by (BoE) Governor, Andrew Bailey, and policymaker, Huw Pill, tomorrow.

Should the contents of these speeches signal that the BoE plans to continue to hike interest rates in the near-term Sterling is likely to strengthen

On the other hand, ANZ Roy Morgan consumer confidence for New Zealand may bolster NZD exchange rates on Thursday if the current prediction of 99, up from 97.7, run true.

New Zealand’s retail sales for the fourth quarter is also likely to boost demand for the ‘Kiwi’s if the expected increase from -8.1% to 10.1% meets market forecasts.

Geopolitical tensions are also likely to continue influencing the Pound New Zealand exchange rate going forward, with any further escalation likely to weigh on the ‘Kiwi’.

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