Pound New Zealand Dollar (GBP/NZD) Exchange Rate Trades Erratically Despite BoE Warning of Further Rate Hikes

Pound New Zealand Dollar (GBP/NZD) Wavers amid Mounting Recession Fears

The Pound New Zealand Dollar (GBP/NZD) exchange rate is fluctuating this morning despite the Bank of England (BoE) confirming further interest rate hikes to tackle inflation.

At time of writing, the GBP/NZD exchange rate is around $1.9302, relatively unchanged from this morning’s opening levels.

Pound (GBP) Undermined by Tumbling Workforce

The Pound (GBP) is struggling for much demand this morning as it grapples with the double-edged sword of a hawkish Bank of England (BoE). Warnings of further rate hikes would usually inspire investors, but the mass exodus of UK workers threatens to stoke inflation.

BoE Chief Economist Huw Pill said that the departure of more than 500,000 workers since the Covid pandemic has put the labour force in dire straits. Employers will look to offer higher wages amid record job vacancies and the lowest unemployment since the 1970s. Inflation is likely to be pushed higher as prices will have to increase to offset the wage hikes. Pill added:

‘Rising inactivity among the working age population represents an adverse supply shock, which adds to the difficult shorter-term trade-offs facing monetary policy.

‘In my judgment there is still some more to do with bank rate in order to address prevailing inflationary pressures and complete the necessary normalisation of monetary policy.’

Further weighing on Sterling is the confirmation of further strikes from the Royal Mail. Walkouts around Black Friday and the run up to Christmas has been confirmed by the Communication Workers Union (CWU). Postal workers will strike after Royal Mail failed to meet their demands. The proposals set out by Royal Mail would turn the service into ‘gig economy-style parcel courier, reliant on casual labour’.

New Zealand Dollar (NZD) Buoyed by Upbeat Market Mood

Meanwhile, the New Zealand Dollar (NZD) found some renewed strength in the face of a vastly improving market mood.

Minutes from the US Federal Open Market Committee (FOMC) revealed a dovish Fed and a possible slowdown in interest rate hikes.

Meanwhile, lending some modest support to the risk-sensitive ‘Kiwi’ is news that China has hinted of further monetary policy stimulus to boost its stuttering economy. However, with Covid infections continuing to rise across the country, further restrictions are likely to offset any gains from the planned stimulus package.

Pound New Zealand Dollar Exchange Rate Forecast: BoE Speeches to Sour the Pound?

Looking ahead, the Pound New Zealand Dollar exchange rate could see further movement with several speeches planned from BoE policymakers. Talks from Chief Economist Huw Pill and MPC member Catherine L. Mann could see Sterling slip if dovish tones are struck.

Meanwhile, the New Zealand Dollar will be left to trade on market sentiment amid a lack of major data. Quarterly and yearly retail sales are due to print tonight, an expected quarterly improvement could lift the ‘Kiwi’ modestly.

Danny Tingle

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