Pound New Zealand Dollar (GBP/NZD) Dips as UK Braces for Bleak Winter
The Pound New Zealand Dollar (GBP/NZD) exchange rate is sliding this morning as UK food prices continue to soar to a new record. Food inflation in the UK jumped by 12.4% in the past 12 months, exacerbating the cost-of-living crisis.
At time of writing, the GBP/NZD exchange rate is around $1.9220, a 0.28% drop from this morning’s opening levels.
Pound (GBP) Muted amid Soaring Inflationary Pressures
The Pound (GBP) is under pressure this morning amid surging food inflation that is set to expose households to a bleak winter.
According to the British Retail Consortium (BRC), the latest data showed food inflation shot up to a record high, as prices leapt by 12.4% in the past year. In a crippling blow in the lead up to Christmas, surging food prices can only worsen the cost-of-living crisis. Helen Dickinson, CEO of the BRC, warned:
‘Winter looks increasingly bleak as pressures on prices continue unabated. Food prices have continued to soar, especially for meat, eggs, and dairy, which have been hit by rocketing energy costs, and rising costs of animal feed and transport.’
With inflation not expected to fall until the second half of 2023, the UK is braced is for the biggest drop in living standards on record. Bank of England (BoE) Chief Economist Huw Pill said earlier this morning that he does expect inflation fall rapidly in the latter stages of 2023. However, he also warns that the UK labour market remains very tight. Adding that wage growth is not consistent with the central bank’s 2% inflation goal.
New Zealand Dollar (NZD) Undermined by Downbeat China Manufacturing
Meanwhile, the New Zealand Dollar (NZD) remains fairly resilient despite a second consecutive month of contracting manufacturing activity in China.
Highlighting the steepest drop in activity since April, manufacturing PMI in China missed forecasts of 49 and printed at 48. Amidst waves of Covid infections and strict lockdown measures, the world’s second largest economy continues to stutter. Ongoing disruptions in China are likely to impact the risk-sensitive New Zealand Dollar.
Further weighing on the ‘Kiwi’ is the latest business confidence survey. Business confidence in New Zealand dropped again, as companies continue to fight inflationary pressures and labour shortages. Falling from -42.7 to -57.1, confidence is now at its lowest since June as financial conditions fail to improve.
Pound New Zealand Dollar Exchange Rate Forecast: UK Services PMI to Sink Sterling?
Looking ahead, the Pound New Zealand Dollar exchange rate could see further movements with the release of final services PMI for November. The service sector is expected to remain in contraction territory, as gloomy economic conditions continue to dampen demand.
Meanwhile, the New Zealand Dollar will likely trade on market sentiment amid a lack of domestic data. With protest clashes in China continuing to weigh on market sentiment, the ‘Kiwi’ could slide on waning market mood.