The Pound New Zealand Dollar (GBP/NZD) exchange rate jumped 1.2% this afternoon following the UK central bank meeting, leaving the pairing trading at around NZ$2.0187.
On Thursday, the Bank of England (BoE) left interest rates on hold, stating the economy had picked up since the General Election, meaning further stimulus was not currently needed.
Markets had been predicting a 50% chance of Governor Mark Carney using his last meeting to cut rates, meaning GBP received an upswing of support and rallied against the ‘Kiwi’.
However, the BoE did leave the door open to rate cuts in the future as Mark Carney prepares to step down and Andrew Bailey takes over in March.
The bank’s meeting minutes stated:
‘The latest data suggest that the uncertainty facing businesses has fallen, and that global growth has stabilised. We expect uncertainty to fall further and global growth to pick up. If that happens, it should help to support growth here in the UK.
‘If that does not happen, then we may need to lower interest rates to support UK growth and ensure that we return inflation to our 2% target sustainably.’
Meanwhile, the New Zealand Dollar was left under pressure as investors continued to move away from riskier assets in favour of traditional safe-havens.
Wuhan coronavirus fears plagued markets over the course of the week as the death toll in mainland China jumped to 170, rising 29% from just a day earlier.
The country also reported over 7,700 causes of the infection, which has spread to at least 15 other countries worldwide.
Commenting on this, FX risk management specialist, Smart Currency Business’ John Marley noted:
‘A risk off theme continues due to the rising infection and death tolls from the coronavirus in China and that is also affecting the Chinese currency which is trading at new lows for the year.’
The risk-sensitive ‘Kiwi’ slumped as investors focused on the potential economic fallout from the virus in both China and the effects this could have on the global economy.
Looking ahead, if virus fears and the risk off mood amongst investors continues to weigh on NZD it could fall further at the end of the week.
If the death toll continues to climb and the risk of the infection to other countries rises, the Pound New Zealand Dollar (GBP/NZD) exchange rate is likely to make further gains.