Pound New Zealand Dollar Exchange Rate News: GBP/NZD Rallies Despite Prolonged UK Recession

Pound New Zealand Dollar Exchange Rate Strengthens Despite Bleak Outlook

The Pound New Zealand Dollar (GBP/NZD) exchange rate is climbing considerably despite the Bank of England (BoE) warning of the longest recession in 100 years.

At time of writing the GBP/NZD exchange rate is trading around $1.9334, a 0.86% leap from this morning’s opening levels.

Pound (GBP) Surges on Refreshed Fiscal Policies

The Pound is enjoying renewed strength against its peers today as early drafts reveal revised fiscal plans.

Supporting the Pound is news that Chancellor Jeremy Hunt is expected to announce more than £60bn tax raises and spending cuts. As the UK government scrambles to undo the devastating mini-budget from last month, investors are slowly regaining confidence. Amidst the rises, at least £35bn will be spending cuts.

However, continuing to weigh on the Pound is the stark warning issued by the BoE. After the central bank raised interest rates at the fastest pace since 1989, the BoE warned that the recession is likely to last until mid-2024. The central bank also wanted that the terminal rate for the cash rate will be lower in 2023 than market expectations. Updated forecasts also painted a bleak picture for the UK economy, as they expect quarterly contractions in output to continue until at least the end of 2023.

GBP investors will be eagerly awaiting the revised fiscal plan on the 17 November. Any further pessimism towards economic growth could impact the Pound.

New Zealand Dollar (NZD) Undermined by Waning Market Sentiment

Meanwhile, the New Zealand Dollar is struggling for demand in the wake of negativity out of China. Disappointing trade figures out of China were compounded by the evaporating optimism surrounding China easing its zero-Covid policy.

Souring market sentiment, and in turn the ‘Kiwi’, China reaffirmed their commitment to their zero-Covid policy. This follows the announcement from Chinese authorities that Covid infections rose to the highest level since May. 5496 new infections were reported on Sunday, the single highest daily increase in six months.

Also further impacting the risk-sensitive ‘Kiwi’ is the latest economic data out of China. A smaller-than-expected rise in the country’s trade surplus highlighted the weakening global demand on exports. The trade surplus widened to $85.15bn from $84.74bn, widely missing the market forecasts. On a yearly basis, exports grew 7% versus an expected 14.8%.

Pound New Zealand Dollar Forecast: Dovish BoE Speeches to Dampen Sterling?

Looking ahead, the Pound New Zealand Dollar exchange rate could see further movement when several BoE speeches are planned. If policymakers continue the central bank’s dovish forward guidance, the Pound could lose steam.

Meanwhile, global market sentiment could continue to influence the New Zealand Dollar. Any further troubling news out of China and the ‘Kiwi’ could slide further.

Danny Tingle

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