Pound New Zealand Dollar (GBP/NZD) Exchange Rate Stumbles as Risk Appetite Returns

Pound New Zealand Dollar (GBP/NZD) Remains Weak amid Risk-On Mood

(Updated 16:00, 20/6/22) The Pound New Zealand Dollar (GBP/NZD) exchange rate fell today as a recovering appetite for risk favoured the riskier ‘Kiwi’ over Sterling.

Meanwhile, the Pound also faces pressure amid ongoing economic concerns. The UK is at risk of recession, with soaring inflation fuelling a cost-of-living crisis.

Many workers are now staging strikes as wages fail to keep pace with inflation. Around 40,000 rail workers will take part in three 24-hour walkouts starting tomorrow. Meanwhile, the Criminal Bar Association (CBA), which represents barristers in England and Wales, has announced strikes to begin from next week.

There are also reports that workers in the NHS and in education are also considering strike action.

The disruption caused by walkouts could add further pressure to the UK’s faltering economy, increasing the likelihood of recession. This seems to have weighed on the Pound (GBP) today.

However, Sterling managed to recoup some losses over the course of the afternoon. Comments from Bank of England (BoE) policymaker Catherine Mann may have helped GBP. Mann, who was one of the minority who voted for a 50-bps hike at the last BoE meeting, argued that steeper rate rises are needed now to prevent inflation becoming embedded. She also said higher interest rates would reduce the risk of further inflation caused by a weaker Pound.

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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Stumbles as Sentiment Recovers

The Pound New Zealand Dollar (GBP/NZD) exchange rate is declining today as a recovery in the global market mood lifts the riskier New Zealand Dollar (NZD).

At the time of writing, GBP/NZD is trading at NZ$1.9269, down from a high of NZ$1.9417 overnight.

New Zealand Dollar (NZD) Rises as Market Mood Improves

The New Zealand Dollar strengthened overnight, despite a mixed market mood.

Following last week’s trio of rate hikes from the Federal Reserve, the Bank of England (BoE) and the Swiss National Bank (SNB), markets have grown concerned that aggressive policy tightening could tip the global economy into a recession.

The fears certainly put some pressure on Asian markets overnight. However, the decision from the People’s Bank of China (PBoC) to leave its loan prime rates unchanged alleviated concerns somewhat. With China maintaining an accommodative approach to policy, investors are hopeful of a swift economic rebound following Covid lockdowns in Beijing and Shanghai.

Today, risk appetite is improving somewhat, thereby supporting NZD. European markets opened higher this morning, suggesting a more upbeat market mood. At the time of writing the STOXX 600 is up 0.47% while the FTSE 100 is up 0.98%.

Pound (GBP) Quiet ahead of Busy Week

Meanwhile, the Pound (GBP) is fairly calm this morning after last week’s turbulence.

GBP investors seem to be taking a breather ahead of what could be another volatile week, with plenty of high-impact data due out from Wednesday onwards.

The upbeat mood in European markets may be providing Sterling with some support. However, UK travel chaos could be undermining the Pound.

Heathrow airport has asked airlines to cancel 10% of flights as it battles a backlog of baggage.

In addition, the UK faces the largest rail strike in 30 years, with 40,000 members of the National Union of Rail, Maritime and Transport Workers (RMT) planning to join three 24-hour walkouts.

Such disruption could hurt the UK travel industry at a time of economic fragility, and these concerns may be weighing on GBP.

GBP/NZD Exchange Rate Forecast: BoE’s Mann to Boost Pound Sterling?

Looking ahead, a speech from BoE policymaker Catherine Mann this afternoon could support Sterling. Mann was one of three officials who voted for a 50-bps rate rise at the BoE’s last meeting. If she strikes a hawkish tone, this could boost GBP.

Otherwise, risk appetite and domestic UK news could influence GBP/NZD today.

Samuel Birnie

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