The GBPNZD exchange rate was higher on Tuesday and Wednesday despite inflation falling to the Bank of England’s 2% target. Investors will now focus on the New Zealand growth figures.
GBPNZD – Daily Chart
The GBPNZD exchange rate has been finding support at the 2.066 level and also has a downtrend resistance line as resistance.
Inflation data on Wednesday showed the UK inflation rate falling to 2% as expected. That was a big deal as it got prices back to the central bank’s target for the first time in two years, which means that the current interest rate level is probably unwarranted.
Thursday at 6:45 am HKT brings the latest New Zealand growth figures, and a reading of 0.2% growth is expected after -0.3% last month. If the number worsens, the British pound can rally to the resistance levels.
Thursday evening also brings the latest Bank of England interest rate meeting. With inflation at 2%, a surprise rate cut cannot be ruled out after the European Central Bank and Bank of Canada cut rates recently.
Most economists expected the banks to maintain a similar tone to the May meeting, and analysts at Barclays Bank expect “little to no change in guidance from the MPC this month.”
However, services inflation at 5.7% last month, down from 5.9% in April, is “still running too hot,” said Zara Noakes at JPMorgan Asset Management.
“Today’s inflation news puts the final nail in the coffin for any hopes of a rate cut from the Bank of England tomorrow… If this stickiness in domestic price pressures continues, alongside ongoing resilience in economic activity, an August rate cut could well be off the table too,” she added.
Other analysts, such as Nomura, thought an August rate cut would still be possible if pay rose and the price of services cooled further. “For an August rate cut, we will need other economic news to play ball,” they said.
