Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rangebound as UK GDP Contracts

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Narrows as UK GDP Falls

The Pound New Zealand Dollar (GBP/NZD) exchange rate is narrowing this morning, after the latest UK GDP release reported a contraction in growth.

At the time of writing, GBP/NZD is trading at around NZ$1.9454, a rise of roughly 0.3% from the morning’s opening rates.

Pound (GBP) Muted as GDP Data Shows Shrinking Economy.

The Pound (GBP) is rangebound this morning after the release of GDP data for the third quarter.

Third quarter QoQ growth fell from 0.2% to -0.2 %, but did print above forecasts of -0.5%. Meanwhile, the YoY data showed a fall from 4.4% to 2.4%, above the expected 2.1%.

While both readings have exceeded forecasts, they both point to a shrinking economy.

With the data demonstrating a bleak outlook for the UK economy, investors have moved away from Sterling. The GDP contractions compound a week of poor news from UK businesses, who have highlighted falling profits and weakening labour markets.

Guy Foster, the Chief Strategist at RBC Brewin Dolphin, expanded on how the GDP data reflects the UK economy. He stated:

‘Economic growth was less bad than feared but the pressure from rising interest rates will intensify going forward, house prices have started falling and the labour market is beginning to ease. The UK economy is showing the signs of a classic slide into recession.’

However, the data printing above expectation may be serving to cushion the Pound during today’s session. Further anchoring Sterling may also be investor confidence in Chancellor Jeremy Hunt, who has stated his intention to make the recession ‘shallower and quicker.’

With the UK entering a recession and austerity predicted, the outlook is continuing to sour despite Thursday’s dramatic rally.

New Zealand Dollar (NZD) Struggles amid Poor Manufacturing PMI

The New Zealand Dollar (NZD) is lacking support this morning following last night’s shock PMI contraction.

BusinessNZ’s PMI for the manufacturing sector printed a contraction for the first time in 2022, showing a fall from 52 to 49.3.

The release shows that New Zealand was joining other countries in facing economic downturn, as was highlighted in BusinessNZ’s report. It stated:

‘Given the global PMI signaled a second successive monthly contraction to stand at 49.4, it appears New Zealand now has a common thread with many other countries of decreasing production and a drop in demand for new orders.’

As such, the risk-sensitive ‘Kiwi’ is struggling to enjoy tailwinds during today’s risk-on market mood, leaving it directionless against most major peers.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Forecast: UK Data to Prompt Rate Hike Bets?

Looking ahead to next week, the key driver of movement for GBP/NZD may be upcoming data releases for the UK.

Unemployment figures due Tuesday are forecast to stay near to record lows, while Wednesday’s consumer price index is expected to report an uptick in inflation. This may prompt the Bank of England (BoE) to re-evaluate their dovish stance to tightening, and could draw bets of further large hikes, thus supporting GBP.

For New Zealand, the main driver could be market sentiment. If the mood turns to risk-aversion, NZD could weaken.

John Mulcahey

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