Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rangebound amid Brexit Inflation Warnings

(Updated 16:35 28/04/22)

The Pound New Zealand Dollar (GBP/NZD) exchange rate traded within a narrow range over the course of the day as a continued risk-off trading mood dampened bets on both currencies. Fears of an energy shortage in Europe and the possibility of lockdowns in Beijing weighed upon both currencies.

At time of writing the GBP/NZD exchange rate is at around $1.9202, nearly unchanged from this morning’s opening figures.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Firms amid Risk-On Impulse

The Pound New Zealand Dollar (GBP/NZD) exchange rate is gaining ground today. The Pound (GBP) seems to be staging a mild recovery after hitting lows against multiple currencies yesterday. A risk-on impulse, evidenced by an uptick around equity markets, may be helping to bolster Sterling. The New Zealand Dollar meanwhile is suffering after below-forecast overnight data and a strong US Dollar (USD).

At time of writing the GBP/NZD exchange rate is at around $1.9231, which is up around 0.3% from this morning’s opening figures.

Pound (GBP) Recovers amid Cost-Of-Living Crisis

The Pound is slowly regaining lost ground today after lows against multiple competitors this week. A risk-on sentiment is likely helping to bolster the currency. Major gains are likely to be limited however amid reduced rate hike hopes and a poor outlook for the UK economy.

Drastic upward movement for Sterling may be limited by the ongoing impact of the country’s cost-of-living crisis. Recent reports have indicated that UK supermarkets are taking a hit to profits in a bid to keep costs low for customers.

Further headwinds for the Pound are likely to come in the form of further Brexit-related issues. Physical checks on fresh food imported from the EU are set to be delayed for a fourth time amid a widespread lack of relevant technology and infrastructure.

Additionally, former Bank of England (BoE) policymaker Adam Posen warned that UK inflation is only set to get worse as a result of Brexit.

Speaking earlier this week, Posen said:

‘You’ve seen a huge drop in migrant labor. When you look at the macro factors, it’s very difficult to see anything other than the labor market issues. It really seems like Brexit has to bear a disproportionate role in explaining the inflation.’

UK job vacancies have continued to soar in recent months to record highs amid a chronic labour shortage.

New Zealand Dollar (NZD) Drops amid Global Slowdown Fears

The New Zealand Dollar (NZD) is falling against its rivals today after worse than expected data. Fears of a global economic slowdown are also limiting bets on riskier currencies such as the ‘Kiwi’ today.

High prices and soaring inflation hit business confidence in New Zealand this month. The business confidence index fell to -42 versus forecasts of -30.7. Businesses highlighted intense inflationary pressures as the main driver for the fall in confidence. The figures are likely weighing on NZD today.

Fears over a global slowdown may also be pushing NZD lower. Concerns have increased in recent days that the Chinese city of Beijing may face a strict lockdown in the face of soaring Covid-19 cases.

Analysts have warned however that such an approach could seriously limit the country’s growth and economic activity.

GBP/NZD Exchange Rate Forecast: Will Bailey Strike Hawkish Tone?

Looking ahead for the Pound, a speech from BoE Governor Andrew Bailey today may drive movement in the currency. Sterling’s fortunes will be largely dictated by the tone struck by Bailey. If he echoes the central bank’s previously cautious language, then GBP could shed some of its gains from earlier today.

The New Zealand Dollar will see no further significant data this week. Global risk appetite is likely to continue to be a key driver of the Kiwi’s movements.

Gareth Monk

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