The Pound-New Zealand Dollar could strengthen if UK inflation reinforces BoE hike bets, while softer New Zealand CPI may weigh on the Kiwi.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate traded sideways on Tuesday as strengthening Reserve Bank of New Zealand (RBNZ) interest rate expectations were offset by the UK’s latest employment figures.
At the time of writing, GBP/NZD was trading at around NZ$2.3479. Virtually unchanged from the start of Tuesday’s session.
Pound to New Zealand Dollar (GBP/NZD): 2.34932 (+0.01%)
Euro to New Zealand Dollar (EUR/NZD): 1.973768 (-0.28%)
New Zealand Dollar to Dollar (NZD/USD): 0.568233 (+0.30%)
DAILY RECAP:
The New Zealand dollar (NZD) rallied through Tuesday’s Asian session, underpinned by expectations for further interest rate hikes from the Reserve Bank of New Zealand.
RBNZ Chief Economist Paul Conway recently indicated that the bank’s upcoming decision could go either way, although he acknowledged that an increase in rates remains more likely than not as he highlighted the inflationary effects of higher global oil prices.
These gains were reinforced by positive risk flows, which continued to be underpinned by broad weakness in the US Dollar (USD).
While left rangebound against the New Zealand Dollar, the Pound (GBP) appreciated against the majority of its other peers on Tuesday, following the publication of the UK’s latest jobs report.
According to data published by the Office for National Statistics (ONS), unemployment in the UK fell from 4.9% to 4.7% in August as the UK economy unexpectedly added 102,000 jobs.
At the same time, annual growth in regular pay, excluding bonuses, accelerated from 3.6% to 3.7% over the same period.
Signs of a more resilient UK labour market were a welcome surprise for Sterling, which caught fresh bids as it further cemented expectations that the Bank of England (BoE) will kick-start a new hiking cycle next month.
Near-Term GBP/NZD Forecast: Rising Inflation to Extend Additional Support to Sterling?
Looking ahead, the Pound to New Zealand Dollar (GBP/NZD) exchange rate may accelerate on Wednesday with the publication of the UK’s latest consumer price index.
September’s CPI figures are forecast to report inflation continues to rise, with price growth expected to accelerate from 3.1% to 3.4% last month.
This will no doubt stoke hawkish BoE expectations and give Sterling another leg up in mid-week trade.
Meanwhile, the publication of New Zealand’s quarterly CPI figures will be in the spotlight for NZD investors late on Wednesday.
However, the data could test recent support for the ‘Kiwi’ if a cooling of inflation in the third quarter dampens RBNZ rate bets.
Our currency coverage draws on live market data, official economic releases and published bank research.
