Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slides as UK’s Economic Woes Grow

Pound New Zealand Dollar(GBP/NZD) Exchange Rate Falls as Markets Remain Uncertain Over New UK PM

(Updated 16:35 02/09/22)

The Pound New Zealand Dollar (GBP/NZD) exchange rate cclumped today today. The possibility of a recession and the impact of the imminent selection of a new UK prime minister may have pushed the currency pair lower.

Speaking on Sterling’s chances today, Chris Beauchamp of IG Group said:

‘Tory PM frontrunner Liz Truss faces the mother of all policy headaches next week if she becomes PM, as seems to be universally expected. Her hints of a wide-ranging programme of tax cuts and pauses in new green levies will help hard-pressed consumers in some ways, but also risk stoking inflation in a manner that threatens to force the BoE’s hand when it comes to rate rises.’

A downbeat US Dollar (USD) benefitted the New Zealand Dollar (NZD) which may have also prompted losses in GBP/NZD. Bank of England (BoE) rate hike bets may have underpinned the pair, however.

At time of writing the GBP/NZD exchange rate is at around $1.8887, which is down roughly 0.4% from the morning’s opening figures.

Original article continues below:

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Trades Narrowly amid Risk-On Mood

The Pound New Zealand Dollar (GBP/NZD) exchange rate is trending sideways today. Poor forecasts for the health of the UK economy and a risk-on mood are likely limiting major gains for the pair. On the other hand, poor trade data for New Zealand could be underpinning GBP/NZD today.

At time of writing the GBP/NZD exchange rate is at around $1.8986, virtually unchanged from the morning’s opening figures.

Pound (GBP) Slips as Economists Forecast Imminent Recession for UK

The Pound (GBP) is edging lower against many of its competitors today amid a downbeat outlook for the UK economy. Economists have highlighted the increasing possibility that the country will soon see a recession. The forecast are likely weighing on Sterling.

Kit Juckes, currency expert at Société Générale, made the UK’s woes very clear:

‘The UK economy is in recession, the balance of payments is catastrophic and more/faster rate hikes won’t do much to restore confidence.’

Research released by the Resolution Foundation thinktank on Thursday only added to the country’s poor forecasts. The groups reports indicated that UK household spending power could take a £3000 hit due to soaring energy costs. The groups reports also found that the country could see its most drastic slip in living standards in decades.

The political uncertainty in the UK may have heightened the impact of the reports. Experts remain uncertain as to whether or not the new UK Prime Minister will implement any additional support for households.

The threat of fresh industrial action may also be contributing to Sterling’s woes today. Yesterday saw the announcement of two more 24 hour strikes for the UK’s rail sector. Around 40,000 workers will strike on 15 and 17 September

Bets on a 0.75% interest rate hike from the Bank of England (BoE) may be helping to prevent drastic losses for the currency, however.

New Zealand Dollar (NZD) Drops amid Poor Trade Figures

The New Zealand Dollar is slipping today after poor trade data overnight. A risk-on impulse may be helping to underpin the ‘Kiwi’, however.

Poor trade data may be weighing on NZD today. Terms of trade figures added fuel to early analysis that the country swung into a trade deficit in the second quarter. Economists blamed high energy costs for the drastic shift.

ANZ economists said:

‘Energy prices, which influence imports, have lifted even more quickly than the prices of the food and fibre we export. The price of imports increased significantly, with petrol prices lifting 42 per cent and non-fuel crude materials up 26 per cent, reflecting global energy shortages.’

GBP/NZD Exchange Rate Forecast: Will New UK PM Help to Stabilise Sterling?

Looking to the week ahead for the Pound, the final reading of August’s services PMI could bolster the currency if the sector expands as forecast. Tuesday’s retail sales figures from the BRC could also push the currency higher if they print positively.

Sterling could also be affected in the coming week by the appointment of a new Prime Minister on 5 September. If bookie’s favourite Liz Truss wins the Conservative leadership contest then it could prompt uncertainty in the currency over her potential economic path.

For the New Zealand Dollar (NZD), the latest reading of the global dairy trade price index on Tuesday could weigh on the currency if it prints a negative reading for the sixth consecutive month.

A downturn in manufacturing sales could also pull NZD lower on Wednesday. The sector is expected to see further struggles.

Finally, any significant data releases for China could drive movement in the ‘Kiwi’.

Gareth Monk

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