GBP/NZD Exchange Rate Falls, Chancellor Vows ‘Whatever It Takes’ to Stimulate UK Economy
The Pound New Zealand Dollar (GBP/NZD) exchange rate plummeted by -0.5% today despite the release of the Spring Budget. This left the pairing trading around NZ$2.04.
Rishi Sunak, the newly-appointed Chancellor of the Exchequer, said that the British economy would be set back by the coronavirus outbreak. Although he pledged that the government would do ‘whatever it takes’ to protect the UK economy.
Mr Sunak said:
‘For a period, it’s going to be tough: but I’m convinced that our economic performance will recover.’
— Ian Jones (@ian_a_jones) March 11, 2020
Sterling traded negatively, however, with fears rising over Britain’s economy due to weak GDP forecasts and Covid-19’s negative impact on the economy going forward.
Dr Kemar Whyte, Senior Economist at NIESR, commented:
‘Economic activity in the UK appears to have been picking up at the beginning of the year. But the outbreak of the coronavirus poses a major threat to the economic outlook.’
New Zealand Dollar (NZD) Rises on US Dollar Sell-Off
The New Zealand Dollar (NZD) benefited from the US Dollar sell-off amid fears of Covid-19 negatively impacting the world’s largest economy.
The ‘Kiwi’ also benefited from yesterday’s speech from the Reserve Bank of New Zealand’s (RBNZ) Governor Adrian Orr.
He was moderately bullish despite the coronavirus’ likely negative impact on New Zealand’s sensitive economy, saying:
‘We will be watching very carefully for what is the important monetary policy response we need to make, but we want to do that in the best and fullest information, not some knee-jerk reaction, because New Zealand doesn’t need a knee-jerk reaction.’
‘We’re in a good space. I’m not sure a knee-jerk reaction would be particularly useful.’
Panic over the European Central Bank’s (ECB) next move has boosted the market appeal of the ‘Kiwi’. This follows after ECB President Christine Lagarde commenting that the coronavirus could cause a crash on the scale of 2008.
GBP/NZD Outlook: Could the ‘Kiwi’ Rise on Positive Business PMI?
New Zealand (NZD) investors are awaiting tomorrow’s release of New Zealand’s Business PMI for February. Any signs of improvement would prove NZD-positive.
However, coronavirus developments will remain in focus. If the Chinese economy is threatened by the growth of Covid-19 cases we could see the NZD/GBP exchange rate shrink.
Sterling investors will be looking ahead to Friday’s Bank of England Minutes. Any dovishness about the British economy going forward would weaken the Pound.