GBP Slides As RBNZ Hike Bets Build

The Pound New Zealand Dollar (GBP/NZD) exchange rate fell to a four-month low on Thursday morning as interest rate hike bets boosted the ‘Kiwi’.

DAILY RECAP:

The New Zealand Dollar (NZD) strengthened overnight on Wednesday, with NZD investors shrugging off an unexpected decline in business confidence.

The latest business outlook index fell sharply from 73.6 to 64.1 in January, rather than rising to 73.9 as expected. However, investors brushed off the decline as confidence remained positive overall.

In addition, the index showed that cost pressures, pricing intentions, wage growth and inflation expectations had all increased, suggesting inflationary pressures are building.

This fuelled recent bets on a possible interest rate hike from the Reserve Bank of New Zealand (RBNZ) as early as this year, particularly in the wake of recent stronger-than-forecast inflation data and an expected rate increase from the Reserve Bank of Australia (RBA) next week.

As a result, NZD struck multi-month highs against some rivals early on Thursday morning.

The Pound (GBP) managed to claw back some losses after touching a four-month low against the New Zealand Dollar, with GBP attracting some dip-buying, but Sterling lacked any impetus for a meaningful recovery.

UK economic data remained in short supply on Thursday, leaving the Pound lacking a clear trajectory.

Near-Term GBP/NZD Forecast: NZ Consumer Confidence to Lift the ‘Kiwi’?

Looking ahead, New Zealand’s latest consumer confidence index is due out Thursday night. Markets expect to see a rise in household morale in January, which could boost NZD exchange rates.

Data then thins out for both the Pound and the New Zealand Dollar on Friday, likely leaving the pairing to trade on wider market trends, including risk appetite and commodity prices.

If a relatively upbeat mood prevails and commodity prices remain strong, the ‘Kiwi’ could consolidate its weekly gains against Sterling.