Pound New Zealand Dollar (GBP/NZD) Exchange Rate Trades Sideways amid Worsening Cost-of-Living Crisis

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Wavers as Inflation Fears Heighten

The Pound New Zealand Dollar (GBP/NZD) exchange rate steadied this morning after dropping sharply overnight. But with inflationary pressures building, the Pound (GBP) seems unable to recoup any losses.

At time of writing the GBP/NZD exchange rate is trading around $1.9408, mostly unchanged since this morning.

Pound (GBP) Fluctuates amid Ongoing Energy Crisis

The Pound is seeing mixed success against the New Zealand Dollar (NZD) today amid the economic crisis that continues to grip the UK.

E.ON energy boss Michael Lewis has warned that soaring UK energy bills will only worsen, and calls for further government intervention:

‘I read emails from customers regularly, I listen in on calls, and frankly, some people are at the edge. They simply cannot pay and that will get worse. [The energy cap] is having a very, very significant impact and that’s why we’ve called upon the government to take more action.’

Consumers will face rising prices for at least another 18 months after the price cap for consumer bills has risen from £1,277 to £1,971 a year and is expected to reach at least £2,600 in October. With the cost-of-living crisis only set to worsen, the Pound could be in for troubling times ahead.

To appease investors, and to quell fears of a recession, Prime Minister Boris Johnson said of the darkening economic landscape:

’In the months ahead, we are going to have to do what we did before, we’re going to use our fiscal firepower that we built up, that we have, to help.’

Will these comments be enough to buoy the Pound?

New Zealand Dollar (NZD) Climbed Overnight Despite Inflationary Pressures

The New Zealand Dollar is enjoying modest gains against its peers today ahead of the Reserve Bank of New Zealand (RBNZ) policy meeting on Wednesday. With the latest inflation rates and labour market reports revealing building economic pressures, all eyes are on the RBNZ to continue tightening monetary policy.

However, economists at MUFG Bank expect the ‘Kiwi’ to remain under pressure unless a more hawkish outlook is taken:

‘The performance of the New Zealand dollar in response to this week’s policy meeting will likely depend upon whether the RBNZ signals that further larger 50bps hikes are likely at upcoming policy meetings. Without such a hawkish policy signal, the ‘Kiwi’ is vulnerable to disappointment.’

Subduing the New Zealand Dollar are mixed headlines out of China as the Covid situation wavers with rising cases, weighing heavily on the risk-sensitive ‘Kiwi’. The South China Morning Post reported that Beijing was contemplating easing their strict quarantine policy amid investor concerns despite 99 new Covid cases reported over the weekend, an increase from 61 on Saturday.

Providing modest tailwinds for NZD was the Australian election results which saw a regime change, with the Labor Party now in power.  The move saw increased optimism across Oceania as investors were relieved that there wasn’t a hung parliament.

Pound New Zealand Dollar Forecast: Domestic Data to Further Stifle the Pound?

With the release of UK PMIs tomorrow, an expected slowdown in both manufacturing and services is expected to hamper the Pound, further lending fears of a looming recession.

Elsewhere, the Reserve Bank of New Zealand is expected to hike the interest rate by 50bps on Wednesday, potentially boosting the ‘Kiwi’ against the Pound.

Further weighing on the Pound will be the ongoing Ukraine crisis and Brexit fears, with neither situation looking positive going forward.

Danny Tingle

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