The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell sharply on Wednesday as improved market sentiment boosted demand for risk-sensitive currencies, with the ‘Kiwi’ rallying strongly.
Pound to New Zealand Dollar (GBP/NZD): 2.30114 (-0.26%)
Euro to New Zealand Dollar (EUR/NZD): 2.00214 (-0.48%)
New Zealand Dollar to Dollar (NZD/USD): 0.58324 (+0.39%)
DAILY RECAP:
The New Zealand Dollar (NZD) surged as global risk appetite improved following the announcement of a ceasefire between the United States and Iran.
Confirmation of the temporary ceasefire and Iran’s commitment to reopen the Strait of Hormuz triggered a broad rally in risk assets.
The shift in sentiment came after heightened tensions earlier in the week, with markets responding positively to signs of de-escalation.
Additional support for NZD came from the Reserve Bank of New Zealand’s latest policy decision.
While interest rates were left unchanged at 2.25%, the central bank struck a relatively hawkish tone, warning that further tightening may be required if inflation pressures persist.
Meanwhile, the Pound (GBP) traded in a narrow range against most of its peers but weakened notably against the New Zealand Dollar.
The improved risk environment and easing energy prices prompted a repricing of Bank of England interest rate expectations.
With lower oil prices expected to reduce inflationary pressures, markets have scaled back expectations for multiple rate hikes this year.
GBP/NZD Forecast: Middle East to Remain in Focus
Looking ahead, in the absence of any notable economic indicators from either New Zealand or the UK, movement in the Pound to New Zealand Dollar (GBP/NZD) exchange rate is likely to be dictated by wider market movements.
This is likely to leave the pairing to be primarily influenced by events in the Middle East, with the current risk-on trade likely to persist so long as the ceasefire holds and shipping through the Strait of Hormuz begins to resume.
