Pound-New Zealand Dollar could stay supported if Healey reassures bond markets, although softer UK GDP risks limiting Sterling’s recovery. The Pound New Zealand Dollar (GBP/NZD) exchange rate briefly hit a seven-week high last week as the ‘Kiwi’ tumbled following the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, although Sterling struggled to sustain its upside.
At the time of writing, GBP/NZD traded at NZ$2.2988, up 0.4% on the week.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.299609 (+0.04%)
Euro to New Zealand Dollar (EUR/NZD): 1.975009 (0.00%)
New Zealand Dollar to Dollar (NZD/USD): 0.587861 (-0.03%)
DAILY RECAP:
The New Zealand Dollar (NZD) edged lower through the start of the week as an anxious mood dampened the risk-sensitive currency’s appeal.
The ‘Kiwi’ then took a tumble on Wednesday in the wake of the RBNZ’s interest rate decision. Although the bank hiked rates by 25 basis points, as expected, the accompanying commentary said that a rate hike this month reduced the likelihood of bigger increases later in the year.
Through the second half of the week, the New Zealand Dollar managed to regain some ground as market sentiment improved.
Meanwhile, the Pound (GBP) was muted on Monday due to a UK bank holiday before facing mixed movement on Tuesday. An uptick in Bank of England (BoE) interest rate hike bets supported Sterling, but surging bond yields unsettled GBP investors.
The Pound struggled against its stronger peers on Wednesday as gilt yields rose again, hitting a 19-year high. However, GBP was able to climb against the weaker NZD.
Bond market jitters eventually saw Sterling surrender some of its gains on Thursday, while a weaker-than-expected final services PMI also dented GBP.
By the end of the week, however, the Pound did remain slightly up against the ‘Kiwi’ Dollar.
Near-Term GBP/NZD Forecast: UK GDP in Focus Looking ahead, UK Chancellor John Healey is expected to deliver his first major speech on Monday, with the market response potentially driving notable movement in the Pound.
Healey will likely focus on how to support the country’s fragile economic growth, while also wanting to encourage bond markets that he will stick to the government’s fiscal rules.
A positive reception to his speech could lift GBP, while Sterling could stumble if the speech falls flat or if Healey spooks the bond market.
The key UK data release for the week will be the latest GDP figures on Friday. If the British economy slowed in July, as expected, the Pound could end the week on the back foot.
Meanwhile, New Zealand’s latest manufacturing PMI is due on Thursday. A slight slowdown in factory activity in August could mute NZD.
Elsewhere, market risk appetite could influence the ‘Kiwi’, with any shifts potentially driving volatility.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-New Zealand Dollar rate could hold above NZ$2.30 if the Kiwi remains pressured by dovish RBNZ guidance, although cautious BoE signals may weigh on Sterling. The Pound to New Zealand Dollar (GBP/NZD) exchange rate jumped to a six-week high on Wednesday in the wake of the Reserve Bank of New Zealand’s (RBNZ) latest interest rate decision.
At the time of writing, GBP/NZD was trading at around NZ$2.3189. Up around 1.1% from the start of Wednesday's session.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.310327 (+0.76%)
Euro to New Zealand Dollar (EUR/NZD): 1.985161 (+0.94%)
New Zealand Dollar to Dollar (NZD/USD): 0.583857 (-0.94%)
DAILY RECAP:
The New Zealand dollar (NZD) plunged on Wednesday despite the Reserve Bank of New Zealand (RBNZ) delivering another interest rate hike,
The RBNZ raised its Official Cash Rate (OCR) by 25 basis points to 2.75%, following its September policy meeting, marking its second consecutive hike after raising rates in July.
However, as the decision itself was widely anticipated, much of the subsequent market reaction centred on the RBNZ’s forward guidance.
This saw the 'Kiwi' tumble as policymakers suggested that hiking this month reduces the risk that the OCR needs to rise again later.
While able to roar higher against the New Zealand Dollar, the Pound (GBP) was left muted against most of its other peers on Wednesday.
Sterling sentiment was muted amid a continued rise in UK borrowing costs, with UK 10-year yields hitting their highest levels since 2008, while 30-year yields climbed to a 28-year high.
The rise in borrowing costs is not unique to the UK, with global bond yields surging over the past couple of days amid growing inflation concerns and expectations for further monetary tightening from central banks.
However, the rise in UK borrowing costs is particularly concerning as the government prepares to deliver its Autumn Budget next month, reducing the amount of fiscal headroom that Chancellor John Healey has to work with.
Near-Term GBP/NZD Forecast: Focus Shifts to BoE Bailey Turning to the second half of the week, the next key catalyst of movement for the Pound to New Zealand Dollar (GBP/NZD) exchange rate will be a scheduled speech by Bank of England (BoE) Governor Andrew Bailey on Friday.
Fresh global inflation concerns have recently bolstered expectations the BoE will tighten monetary policy later in the year.
However, Bailey has previously been cautious in regard to potential rate hikes, which could place significant pressure on the Pound later in the week if he strikes a similar tone.
Meanwhile, the fallout from the RBNZ's rate decision as well as global bond market jitters could see the 'Kiwi' languish through the latter half of the week.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-New Zealand Dollar could face further pressure if the RBNZ raises rates, while cautious BoE signals may leave Sterling vulnerable. The Pound New Zealand Dollar (GBP/NZD) exchange rate was volatile last week, with the pairing eventually sliding to a 12-week low.
At the time of writing, GBP/NZD traded at NZ$2.2824, virtually unchanged on the week.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.288956 (+0.22%)
Euro to New Zealand Dollar (EUR/NZD): 1.958837 (+0.07%)
New Zealand Dollar to Dollar (NZD/USD): 0.591274 (-0.68%)
DAILY RECAP:
The Pound (GBP) attracted some support on Monday after an analysis from the Resolution Foundation thinktank suggested that UK productivity may have improved in recent years, rather than weakening.
Sterling then fluctuated, as a lack of data left it exposed to volatility.
After GBP/NZD touched a five-day high midweek, the Pound then retreated. The Confederation of British Industry’s (CBI) latest distributive trades survey came in worse than expected, while rising energy bills raised cost-of-living concerns.
With UK data thin through the latter part of the week, Sterling moved without a clear direction.
Meanwhile, the New Zealand Dollar (NZD) stumbled at the start of the week after New Zealand reported a surprise contraction in retail sales in the second quarter.
The risk-sensitive ‘Kiwi’ faced further pressure as the week went on, with a risk-off mood and domestic political uncertainty both pressuring the currency.
However, an improving market mood helped the New Zealand Dollar regain ground through the second half of the week.
Near-Term GBP/NZD Forecast: RBNZ Rate Hike to Lift the ‘Kiwi’? Looking ahead, the focus for NZD investors this week will be the Reserve Bank of New Zealand’s (RBNZ) interest rate decision during Wednesday’s Asian trading session. A rate hike from the central bank could boost the ‘Kiwi’.
The New Zealand Dollar could then trim its gains on Thursday night, if the latest ANZ consumer confidence index shows a deterioration in morale in August.
As for the Pound, the UK’s final services PMI could influence Sterling on Thursday. If it confirms an improvement in activity in August, the British currency could climb.
A speech from Bank of England (BoE) Governor Andrew Bailey could then affect GBP on Friday, with the Pound potentially struggling if the BoE chief remains cautious about the need for further rate hikes.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-New Zealand Dollar could extend above NZ$2.30 if UK growth holds firm, although stronger RBNZ rate expectations may help the Kiwi recover. The Pound to New Zealand Dollar (GBP/NZD) exchange rate climbed to a two-week high on Thursday as deteriorating global risk appetite weighed on the risk-sensitive ‘Kiwi’.
At the time of writing, GBP/NZD was trading around NZ$2.3044, up approximately 0.3% from Wednesday's opening levels.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.3051 (+0.30%)
Euro to New Zealand Dollar (EUR/NZD): 1.968098 (+0.22%)
New Zealand Dollar to Dollar (NZD/USD): 0.586233 (-0.27%)
DAILY RECAP:
The New Zealand Dollar (NZD) came under pressure as a deterioration in global risk sentiment weighed on the risk-sensitive currency.
Investor confidence weakened amid growing concerns that US-Iran ceasefire negotiations had reached an impasse.
Despite previous optimism from US officials that an agreement could be days away, recent rhetoric from Tehran and remarks from US President Donald Trump suggested the two sides remained at odds in several areas.
The prospect of a prolonged closure of the Strait of Hormuz pushed global oil prices back towards US$90 per barrel and weighed on the ‘Kiwi’ as traders rotated away from higher-risk assets and towards traditional safe havens.
Meanwhile, while the Pound (GBP) appreciated against the New Zealand Dollar, it traded sideways against most of its other major peers.
In the continued absence of notable UK economic releases, Sterling struggled to find fresh impetus.
GBP sentiment was also subdued by analysis from the Verdant thinktank suggesting that multiple heatwaves have cost the UK economy US$4bn in lost output so far this year.
Near-Term GBP/NZD Forecast: Improving Risk Appetite to Underpin the ‘Kiwi’? Looking ahead, the UK's latest GDP figures are expected to provide the next major catalyst for the Pound to New Zealand Dollar exchange rate.
The preliminary estimate for second-quarter growth is forecast to show the UK economy expanded by 0.4%, down from 0.6% in the first quarter.
Although slower than at the start of the year, a 0.4% expansion would still represent a healthy pace of growth and could extend Sterling's upside if investors see it as encouraging the Bank of England to tighten monetary policy later this year.
Meanwhile, the ‘Kiwi’ could receive support if an increase in New Zealand business inflation expectations strengthens Reserve Bank of New Zealand rate hike bets.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-New Zealand Dollar could extend its recovery if weaker New Zealand labour market data continues to dampen RBNZ rate expectations, although improving risk sentiment may support the Kiwi. The Pound to New Zealand Dollar (GBP/NZD) exchange rate rebounded from a two-month low on Wednesday after weaker-than-expected New Zealand employment figures weighed on the ‘Kiwi’.
At the time of writing, GBP/NZD was trading around NZ$2.2944, up approximately 0.5% on the day.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.289981 (0.00%)
Euro to New Zealand Dollar (EUR/NZD): 1.963768 (+0.02%)
New Zealand Dollar to Dollar (NZD/USD): 0.587895 (+0.09%)
DAILY RECAP:
The New Zealand Dollar (NZD) retreated during Wednesday's Asian session after weaker-than-expected labour market data prompted investors to reassess expectations for further Reserve Bank of New Zealand (RBNZ) interest rate hikes.
Official figures showed New Zealand's unemployment rate climbed to 5.6% in the second quarter, its highest level in more than a decade and above forecasts for a rise to 5.4%.
The report also showed wage growth remained subdued, suggesting underlying domestic inflation pressures may be easing.
The figures came only weeks after stronger-than-expected inflation data had encouraged speculation that the RBNZ could continue tightening monetary policy.
However, the deterioration in employment conditions prompted investors to scale back some of those hawkish expectations, leaving the ‘Kiwi’ under pressure despite a broader improvement in risk appetite following renewed optimism over the reopening of the Strait of Hormuz.
Meanwhile, the Pound (GBP) strengthened following the publication of the UK's latest services PMI.
July's final reading was revised higher from the preliminary estimate, confirming the UK's dominant services sector rebounded strongly after June's slowdown.
The stronger survey reinforced expectations that the UK economy remains resilient, potentially allowing the Bank of England (BoE) to keep the option of further policy tightening on the table later in 2026.
Near-Term GBP/NZD Forecast: Improving Risk Appetite to Underpin the Kiwi? Looking ahead, the Pound to New Zealand Dollar exchange rate may struggle to build on Wednesday's gains if market sentiment continues to improve.
Any agreement to reopen the Strait of Hormuz could encourage investors back into risk-sensitive assets and help the New Zealand Dollar recover.
Conversely, renewed geopolitical tensions or fresh US threats towards Iran could weigh on risk appetite and provide further support for GBP/NZD.
With little UK economic data scheduled through the remainder of the week, Sterling may struggle to establish a strong independent direction.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell to a six-week low last week before recovering as UK political developments, high-impact economic data and the escalating US-Iran conflict drove volatility.
At the time of writing, GBP/NZD was trading at NZ$2.3020, virtually unchanged over the week.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.299017 (-0.09%)
Euro to New Zealand Dollar (EUR/NZD): 1.962339 (-0.07%)
New Zealand Dollar to Dollar (NZD/USD): 0.580926 (+0.32%)
DAILY RECAP:
The Pound (GBP) wobbled at the start of the week as markets were caught off guard by Prime Minister Andy Burnham’s surprise choice for Chancellor. Burnham appointed former Defence Secretary John Healey as head of the Treasury.
Sterling then began to trend lower amid concerns about the government’s commitment to fiscal discipline as Burnham started to outline plans to cut some taxes.
Political developments overshadowed several high-impact UK economic releases, including the latest labour market report and consumer price index.
The CPI figures were mixed and failed to prompt decisive movement in the Pound. Headline inflation cooled more than forecast, easing from 2.8% to 2.6%, while core inflation unexpectedly held at 2.6% rather than slowing to 2.5%.
While GBP was able to recover against riskier currencies as the market mood soured, it struggled elsewhere.
Strong data on Friday also failed to boost Sterling, with UK retail sales in June and the services PMI for July both unexpectedly accelerating.
Meanwhile, the New Zealand Dollar (NZD) strengthened at the start of the week, shrugging off weaker-than-forecast trade figures and escalating tensions in the Middle East.
The ‘Kiwi’ then extended its gains as New Zealand inflation exceeded expectations, accelerating from 3.1% to 4.1% in the second quarter. This fuelled bets on further interest rate increases from the Reserve Bank of New Zealand (RBNZ).
After striking a six-week high against the Pound on Tuesday, the New Zealand Dollar retreated through the remainder of the week.
With the crisis in the Middle East intensifying, a deeply risk-averse market mood weighed heavily on NZD and allowed GBP/NZD to recover.
Near-Term GBP/NZD Forecast: BoE Interest Rate Decision in Focus Looking ahead, the Bank of England’s interest rate decision on Thursday is in the spotlight for GBP investors this week.
The Bank is expected to hold interest rates steady, which would leave markets focused on the BoE’s forward guidance.
If policymakers indicate that rate hikes remain likely in the coming months, particularly following the recent rise in energy prices, Sterling could strengthen.
Ahead of the decision, political developments could continue to drive volatility in the Pound.
As for the New Zealand Dollar, the latest business and consumer confidence indexes could influence NZD, with the releases due overnight on Wednesday and Thursday, respectively.
If morale among businesses and consumers deteriorated in July, the ‘Kiwi’ could weaken.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate slipped to a one-month low on Tuesday after stronger-than-expected New Zealand inflation reinforced expectations for further Reserve Bank of New Zealand interest rate hikes.
At the time of writing, GBP/NZD was trading around NZ$2.2939, down approximately 0.2% on the day.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.295692 (+0.02%)
Euro to New Zealand Dollar (EUR/NZD): 1.956495 (+0.29%)
New Zealand Dollar to Dollar (NZD/USD): 0.5827 (-0.43%)
DAILY RECAP:
The New Zealand Dollar (NZD) appreciated through Tuesday's Asian trading session as markets digested New Zealand's latest consumer price index.
According to the CPI figures published by Stats NZ, annual inflation accelerated to 4.1% in the second quarter, up from 3.1% previously and above market forecasts of 4.0%.
Perhaps more importantly, the Q2 inflation print also outpaced the Reserve Bank of New Zealand’s previous 3.9% forecast.
This prompted NZD investors to increase their bets on further monetary tightening after the RBNZ's recent decision to lift the Official Cash Rate to 2.5%.
However, the ‘Kiwi’ was unable to sustain its best levels for long, with NZD exchange rates falling back by the start of the European session as market risk appetite was sapped by the continued escalation of tensions in the Middle East.
Meanwhile, trade in the Pound (GBP) was broadly flat on Tuesday as the UK's latest jobs report helped to calm concerns over turbulence in the UK bond market at the start of the session.
The Office for National Statistics (ONS) reported that unemployment held steady at 4.9% in May, against forecasts it would rise to 5.0%, while employment growth accelerated from 100,000 to 147,000 against consensus estimates it would drop to 85,000.
The surprisingly robust jobs data was welcomed by GBP investors as it increased the chances of the Bank of England (BoE) tightening monetary policy later in the year.
However, Sterling's upside potential remained capped after the start of Andy Burnham's premiership triggered a rise in UK gilt yields as he signalled his willingness to exercise flexibility while still adhering to fiscal rules.
Near-Term GBP/NZD Forecast: Slowdown in UK Inflation to Sap Sterling? Looking ahead, the next catalyst for the Pound to New Zealand Dollar exchange rate will be the UK's latest inflation figures.
Economists expect UK inflation to have cooled further in June, with Sterling likely to come under pressure if the data weakens expectations for further Bank of England interest rate hikes.
Meanwhile, the ‘Kiwi’ could face headwinds if New Zealand's latest credit card spending figures point to a slowdown in consumer spending last month.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell to a three-week low last week as strong domestic data and rising Reserve Bank of New Zealand rate hike expectations helped the ‘Kiwi’ outperform Sterling.
At the time of writing, GBP/NZD was trading at NZ$2.3052, down around 0.8% on the week.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.302862 (-0.19%)
Euro to New Zealand Dollar (EUR/NZD): 1.957782 (-0.08%)
New Zealand Dollar to Dollar (NZD/USD): 0.58422 (+0.02%)
DAILY RECAP:
The Pound (GBP) was subdued at the start of the week amid a lack of UK economic data.
Comments from Bank of England Governor Andrew Bailey also pressured the Pound, as the BoE chief raised concerns about the UK’s long-running problem with sluggish growth.
Sterling rallied midweek amid speculation around who would become Chancellor under incoming Prime Minister Andy Burnham.
Shabana Mahmood overtook Ed Miliband as the frontrunner, with markets welcoming the news as Mahmood is seen as more fiscally responsible.
However, GBP couldn’t sustain its upside, even with UK GDP showing a 0.1% rebound in May.
Investors moved to book their profits in the Pound after it struck multi-month highs against some of its peers, sending Sterling lower.
Meanwhile, the New Zealand Dollar (NZD) started strong last week, building on the previous week’s gains, as domestic data continued to underpin the ‘Kiwi’.
New Zealand’s June services PMI exceeded forecasts, reporting an unexpected expansion in the sector.
In addition, business confidence in the country rebounded 8% in the second quarter, rather than deteriorating.
The risk-sensitive currency relinquished some gains in the middle of the week as escalating tensions in the Middle East soured the market mood.
However, the ‘Kiwi’ was able to find its footing again to end the week with most of its gains intact, as markets continued to price in more interest rate hikes from the Reserve Bank of New Zealand (RBNZ) following the recent strong domestic data.
Near-Term GBP/NZD Forecast: High-Impact Data to Drive Volatility? Looking ahead, the first major data release this week will be New Zealand’s second-quarter inflation figures. If inflation accelerated as expected, the ‘Kiwi’ could be buoyed by RBNZ rate hike bets.
The focus then shifts to GBP data, with the UK’s latest jobs report to be published on Tuesday. Signs that the labour market has stopped softening – such as steady unemployment and wage growth – could boost the Pound.
The UK consumer price index on Wednesday could then dent GBP, if it shows that headline inflation eased in June.
Finally, Friday brings the UK’s June retail sales figures and preliminary PMIs for July. A slowdown in sales last month and another contraction in service sector activity this month could see Sterling end the week on a sour note.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate opens the new week around 2.3239 after slipping to its lowest level in almost two weeks, with the New Zealand Dollar continuing to outperform as markets respond to a more hawkish Reserve Bank of New Zealand.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.323928 (-0.10%)
Euro to New Zealand Dollar (EUR/NZD): 1.979635 (-0.06%)
New Zealand Dollar to Dollar (NZD/USD): 0.576117 (-0.03%)
WEEKLY RECAP:
GBP/NZD drifted lower through the second half of last week after failing to hold above the 2.35 level.
Sterling remained broadly supported.
Markets continue to expect the Bank of England to proceed cautiously on interest rates despite signs that UK growth has moderated.
Recent UK inflation data remains above target, helping to underpin the Pound even as business surveys point to a softer economy.
In its latest FX briefing, ING noted that Sterling continues to trade primarily on domestic economic and political developments rather than broad US Dollar moves.
The New Zealand Dollar has strengthened.
The Reserve Bank of New Zealand surprised markets last week by raising the Official Cash Rate and signalling that inflation risks linked to the Middle East energy shock and a stronger domestic economy warranted a tighter policy stance.
Governor Anna Breman also highlighted evidence that the economic recovery is gathering momentum, supported by exports, tourism and improving business confidence.
MUFG said in its latest weekly outlook that New Zealand interest-rate expectations have shifted materially higher, with investors continuing to price additional tightening before year-end.
The improving outlook for the Kiwi Dollar has coincided with a broader recovery in global risk appetite, encouraging demand for higher-yielding currencies.
Near-Term GBP/NZD Forecast: China GDP and New Zealand Business Confidence in Focus For Pound Sterling, attention this week turns to Thursday's UK monthly GDP estimate for May, together with industrial production, manufacturing production and trade balance figures.
Stronger-than-expected data would reinforce confidence that the UK economy is proving more resilient than recent business surveys suggest.
For the New Zealand Dollar, the focus will be on Wednesday's Q2 NZIER Survey of Business Opinion, retail card spending, house price data and remarks from the RBNZ's Chief Economist.
Investors will also pay close attention to China's second-quarter GDP, industrial production and retail sales, given China's importance as New Zealand's largest export market.
A stronger Chinese growth report and another improvement in New Zealand business confidence would likely provide further support for the Kiwi Dollar.
However, if UK GDP surprises to the upside while Chinese data disappoints, GBP/NZD could rebound towards 2.35.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell sharply on Wednesday after the Reserve Bank of New Zealand delivered a widely anticipated interest rate hike and maintained a hawkish policy outlook.
At the time of writing, GBP/NZD was trading at NZ$2.3424, down around 0.4% on the day.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.350921 (-0.03%)
Euro to New Zealand Dollar (EUR/NZD): 2.004614 (-0.22%)
New Zealand Dollar to Dollar (NZD/USD): 0.568748 (+0.22%)
DAILY RECAP:
The New Zealand Dollar (NZD) leapt higher during Wednesday’s Asian trading session after the RBNZ announced its latest interest rate decision.
The bank raised interest rates by 25 basis points, bringing the official cash rate to 2.5%. Markets had expected around a 70% probability of a rate hike, with the decision providing NZD with notable support.
In addition, the bank also indicated that further rate hikes remain on the table. This hawkish tone further boosted the New Zealand Dollar’s appeal.
However, a risk-off market mood saw NZD trim its gains. Escalating tensions between the US and Iran limited the risk-sensitive currency’s appeal.
Meanwhile, the Pound (GBP) struggled to attract support on Wednesday, as a lack of UK economic data left Sterling without much impetus.
The increasingly risk-sensitive British currency weakened against its safer rivals amid a risk-off market mood. However, the anxious tone among investors helped Sterling to recoup some losses against the more risk-sensitive New Zealand Dollar.
Near-Term GBP/NZD Forecast: New Zealand PMI to Weigh on the ‘Kiwi’? Looking ahead, New Zealand’s latest manufacturing PMI could weigh on NZD on Wednesday night. Markets expect the June index to weaken for the sixth consecutive month and reveal the second consecutive contraction in factory activity.
Meanwhile, market risk appetite could also influence the ‘Kiwi’. If tensions continue to escalate in the Middle East, a souring market mood could weigh on the risk-sensitive New Zealand Dollar, potentially prompting it to surrender some of its post-RBNZ gains.
As for the Pound, the nominations for the Labour leadership will open on Thursday. If no other candidates step forward to challenge frontrunner Andy Burnham, Sterling may remain stable.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell sharply on Wednesday after the Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate by 25 basis points to 2.50%, boosting the 'Kiwi' as policymakers struck a more hawkish tone than many investors had anticipated.
At the time of writing, GBP/NZD was trading at NZ$2.3369, down around 0.6% on the day after retreating from recent six-month highs.
Latest — Exchange Rates:
Pound to New Zealand Dollar (GBP/NZD): 2.337366 (-0.61%)
Euro to New Zealand Dollar (EUR/NZD): 1.99811 (-0.54%)
New Zealand Dollar to Dollar (NZD/USD): 0.571431 (+0.70%)
DAILY RECAP:
The New Zealand Dollar (NZD) rallied after the Reserve Bank of New Zealand increased the Official Cash Rate by 25 basis points to 2.50%, marking the first increase in the current tightening cycle.
Importantly, the decision was reached by consensus, with both the Reserve Bank's internal members and external Monetary Policy Committee members backing the rate increase after the previous meeting ended in a split vote.
The Committee said monetary policy remains stimulatory and that a modest reduction in that stimulus was appropriate to help ensure inflation returns sustainably to the 2% midpoint of its target range. Policymakers also acknowledged that inflation risks remain elevated despite lower oil prices and easing geopolitical tensions.
The prospect of further policy tightening later this year helped lift New Zealand government bond yields and supported the 'Kiwi' across the currency market.
Meanwhile, the Pound (GBP) struggled to offset the New Zealand Dollar's gains.
Sterling remained broadly supported by expectations that UK interest rates will stay relatively elevated, but the RBNZ's surprise consensus behind a rate increase proved the dominant driver of GBP/NZD price action.
Near-Term GBP/NZD Forecast: Focus Turns to the RBNZ's Next Move Following Wednesday's widely expected 25 basis point increase, investors will now focus on whether the Reserve Bank of New Zealand signals additional policy tightening in the months ahead.
While policymakers stressed that future decisions will remain data dependent, the consensus vote and accompanying statement suggest the Committee remains concerned about inflation risks and is prepared to tighten further if necessary.
If markets continue to price in another RBNZ rate increase later this year, the New Zealand Dollar could remain well supported.
For Sterling, attention will remain on incoming UK economic data and Bank of England expectations, although the near-term direction of GBP/NZD is likely to be driven primarily by changing interest rate expectations between the two central banks.
