The Pound New Zealand Dollar (GBP/NZD) exchange rate is falling today as the UK’s poor outlook continues to weigh on the pair. The currency pair traded within a narrow range over much of the past week, before the unveiling of the UK government’s ‘mini-budget’ saw GBP/NZD plummet.
What’s Been Happening: Pound Nosedives as Markets Fear that Tax Cuts Could Balloon Borrowing
The Pound initially struggled for direction last week amid a lack of significant data. Above-forecast government borrowing for August weighed on the Pound initially.
Sterling did see a rise ahead of the Bank of England’s (BoE) interest rate hike on Thursday amid bets on a more aggressive 0.75% rate hike.
The BoE’s subsequent cautious hike of 0.5% saw the currency shed its gains however amid warnings that the UK may already be in a recession.
The currency the crashed on Friday after the announcement of the UK government’s mini-budget proposing drastic tax cuts to be funded through further borrowing. A lack of intervention from the BoE also dented confidence in the currency.
The New Zealand Dollar (NZD) saw its upward movement limited by an above-forecast widening in the country’s trade deficit last week.
A risk-off mood also weighed on the ‘Kiwi’ amid US Dollar (USD) strength.
Weekly highlights
- BoE Speeches
Amid inaction from the central bank in the face of a tumbling Pound, traders will be looking to speeches from BoE policymakers for any hints of forward guidance. Will cautious speeches push Sterling lower?
- NZ Business Confidence
The forecast drop in business confidence in September could weigh on the ‘Kiwi’, although an improvement from the previous month’s figures could restore some long-term confidence in the currency.
- UK Q2 GDP Growth Figures
The final printing of second quarter GDP growth figures could cause losses in the Pound. The 0.1% downturn is likely to add to the predictions of a recession.
GBP/NZD Forecast
The UK’s poor outlook is likely to continue to weigh on the Pound this week. If Chancellor Kwasi Kwarteng unveils any further policies then it could prompt further movement in the currency.