Pound-New Zealand Dollar could face further pressure if UK PMIs disappoint, while RBNZ inflation concerns may continue to support the Kiwi.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate was knocked on Tuesday, as the Reserve Bank of New Zealand’s (RBNZ) issued a fresh warning regarding inflation.
At the time of writing, GBP/NZD was trading at around NZ$2.3314. Down around 0.3% from the start of Tuesday’s session.
Pound to New Zealand Dollar (GBP/NZD): 2.333482 (-0.33%)
Euro to New Zealand Dollar (EUR/NZD): 2.000976 (-0.33%)
New Zealand Dollar to Dollar (NZD/USD): 0.57253 (+0.27%)
DAILY RECAP:
The New Zealand dollar (NZD) initially slipped to a new multi-week low during Tuesday’s overnight session, before rebounding sharply, following comments from Reserve Bank of New Zealand Governor Anna Breman.
Breman raised fresh concern about the inflationary pressures posed by the recent spike in oil prices, warning that if higher energy costs endure, near-term inflation could come in above the bank’s latest forecasts.
The comments offered some support to the New Zealand Dollar, as the prospect of stronger-than-expected inflation places more pressure on the RBNZ to raise rates more quickly, having signalled at its September meeting that it would pursue a gradual pace of tightening than markets had expected.
However, NZD’s recovery was subsequently tempered at the start of the European trading session as demand for the ‘kiwi’ was undermined by growing risk aversion.
The Pound (GBP) came under modest selling pressure on Tuesday after UK public sector borrowing significantly exceeded expectations in August, adding to concerns over the government’s already limited fiscal headroom ahead of the upcoming Budget.
According to data published by the Office for National Statistics (ONS), public sector net borrowing climbed by £18.3bn in August, smashing forecasts it would only reach £15.7bn.
The latest figures provided an unwelcome reminder of the challenges facing Chancellor John Healey, who will have even less room to manoeuvre in his upcoming Autumn Budget.
Near-Term GBP/NZD Forecast: Sterling to Stumble on Weaker PMIs?
Looking ahead, the Pound to New Zealand Dollar (GBP/NZD) exchange rate could face further headwinds in mid-week trade, with the publication of the UK’s latest PMIs.
Both the manufacturing and services PMIs are forecast to report a moderation of growth in their respective sectors this month.
This is likely to sap Sterling sentiment, particularly if investors believe it might make the Bank of England (BoE) might be more hesitant to tighten monetary policy.
Meanwhile, in the absence of any notable NZD macroeconomic data, any movement in the ‘kiwi’ is likely to be tied to market risk dynamics, with the ‘kiwi’ potentially facing headwinds if sentiment continues to sour.
Our currency coverage draws on live market data, official economic releases and published bank research.
