Pound New Zealand Dollar (GBP/NZD) Holds Gains Ahead Of Fed Decision

GBP/NZD Exchange Rate Trades Narrowly ahead of Major Event

Ahead of the Federal Reserve’s latest monetary policy statement, risk appetite dwindled on investor uncertainty.

At the time of writing, <a href=”https://www.exchangerates.org.uk/Pounds-to-New-Zealand-Dollars-currency-conversion-page.html”>GBP/NZD</a> is trading at NZ$1.8111, having climbed by more than 0.5% in the past 24 hours.

The Pound (GBP) trended in a mixed range yesterday, climbing against risk-sensitive currencies while struggling to gain against the strengthening US Dollar (USD). The safe-haven ‘Greenback’ amassed support ahead of the evening’s interest rate decision as a cautious market mood prevailed.

Sterling resisted headwinds, however, as better-than-expected manufacturing data for the month of April lent support. Last month’s finalised reading printed at 49.1 rather than the earlier estimate of 48.7, indicating that the sector is struggling less than initially thought.

Nevertheless, the PMI still marks a fall back into contraction territory after March’s reading of 50.3. Analysts at S&P global observed that both output and new orders declined following short-lived upturns in March, as uncertain market conditions, client destocking, and supply-chain disruption weighed upon productivity.

Also giving GBP a small boost may have been the most recent UK housing data. House prices fell in April rather than rising as expected, according to Nationwide Building Society, extending March’s downturn. Commenting upon the earlier release, Robert Gardner, Nationwide’s chief economist, said:

‘Activity has picked up from the weak levels prevailing towards the end of 2023 but remain relatively subdued by historic standards.’

Nationwide added that as the cost-of-living pressure eases and inflation rates reduce, consumer sentiment is improving and new buyer inquiries are increasing.

A lack of further significant data this week leaves the Pound to trend upon general risk sentiment and external factors such as UK politics. Rumours are circulating with regard to when the next general election will be called, as the implementation of controversial policies recently has triggered an escalation in political unrest.

New Zealand Dollar (NZD) Dented by Weak Jobs Data

The New Zealand Dollar (NZD) sank across the board yesterday, pressured following the release of a disappointing employment report on Tuesday evening.

Rather than adding jobs to the economy as expected in Q1 2024, New Zealand’s economy cut employment; the latest reading printed at –0.2% rather than the 0.3% predicted. Furthermore, the country’s unemployment rate rose by more than forecast, printing at 4.3%. Given the outcome of the report, NZD fell by 1.5% against the US Dollar on Tuesday; analysts remarked that it bought 58.77 US cents at noon in Wellington from 58.86 cents beforehand.

Jarrod Kerr, chief economist at Kiwibank in Auckland, commented of the release:

‘The Kiwi economy has been through a significant recession. Four of the last five quarters have recorded a contraction… The labor market lags the economy by about 9 to 12 months. So there’s still another year of softness ahead.’

Yet experts expect that signs of a loosening labor market will be welcomed by the Reserve Bank of New Zealand (RBNZ) as it attempts to return inflation to its 1-3% target band.

While several major central banks have indicated that they will implement interest rate cuts in the near term, ‘Kiwi’ investors are betting on a fourth-quarter rate cut from the RBNZ with the support of economists. Still others although expect that rates will remain unchanged into next year.

Also pressuring NZD yesterday was a disappointing manufacturing release from Australia: the country’s finalised manufacturing PMI for the month of April printed at 49.6 rather than the 49.9 estimated. Given the close trading relationship between Australia and New Zealand, weak AU data invariably dents ‘Kiwi’ morale.

GBP/NZD Exchange Rate Forecast: Fed Decision to Remain in Focus

The Pound New Zealand Dollar exchange rate is likely to continue trading today according to yesterday evening’s interest rate decision from the Fed. The central bank’s economic outlook has repercussions across the currency market, given the status of the US economy as the world’s largest and most influential.

In addition, Australia’s latest trade balance may have some effect upon GBP/NZD, although this is likely to be minimal. If the country’s trade surplus increased as expected in March, Australian Dollar (AUD) tailwinds may boost the New Zealand Dollar, pressuring the Pound ‘Kiwi’ exchange rate.

Elsewhere, a lack of domestic data from both the UK and New Zealand leaves the currencies exposed to external factors. Geopolitical tensions and public dissatisfaction over the UK’s political situation could dampen Sterling optimism, potentially causing GBP/NZD to sink.