Pound New Zealand Dollar (GBP/NZD) Exchange Rate Strengthens on NZ Recession Fears

Pound New Zealand Dollar Exchange Rate Consolidates Post-GDP Gains

The Pound New Zealand Dollar (GBP/NZD) exchange rate is steady this morning as the pairing consolidates its overnight gains.

At the time of writing the GBP/NZD exchange rate is trading at around NZ$1.9565. Virtually unchanged from this morning’s opening levels. But up almost one cent overnight.

New Zealand Dollar (NZD) Slumps on GDP Miss

The New Zealand Dollar (NZD) retreated overnight on Wednesday, following the publication of New Zealand’s latest GDP figures.

According to data published by Stats NZ, GDP in the fourth quarter contracted 0.6%. This was down from a 1.7% expansion in Q3 and was below the 0.2% decline forecast.

The slump in GDP was attributed to broad-based weakness. New Zealand’s economy being buffeted at the end of 2022 by declines in manufacturing, retail, and hospitality.

NZD investors fear this likely marks the start of a recession. Adverse weather conditions at the start of 2023 means a Q1 contraction is a clear risk.

The sharp decline in growth is also likely to change the outlook for the Reserve Bank of New Zealand (RBNZ).

The RBNZ has pursued an aggressive path of monetary tightening since late 2021. Raising interest rates by 450bps as it looks to engineer a ‘shallow recession’.

However the fourth quarter figures indicate growth may be slowing more than planned. This casts doubts over the prospect of an additional 75bps worth of hikes this year. Speculation the RBNZ could prematurely end its hiking cycle, unsurprisingly left the ‘Kiwi’ weaker overnight.

Pound (GBP) Muted as Strikes Grind UK to a Halt

The Pound (GBP) is struggling to find momentum this morning amid concerns over industrial action in the UK.

Teachers and rail workers are striking today, bringing considerable disruption to the UK economy.

Figures published by the Office for National Statistics (ONS) earlier this week reveal the UK lost over 2m working days to strikes in 2022.

Elsewhere, the Pound is being pressured by a uneven market mood and speculation the current banking sector woes could lead the Bank of England (BoE) to refrain from raising interest rates any further.

Pound New Zealand Dollar Exchange Rate Forecast: Banking System Crisis to Inject Volatility

The Pound New Zealand Dollar exchange rate could trade in a wide range through the end of the week as an absence of any notable data likely places the focus on the current banking sector crisis.

If markets continue to express concerns over the resilience of the banking system investors are likely to shy away from risk-sensitive assets.

This could bolster the GBP/NZD exchange rate as a risk-off mood is likely to disproportionately impact the ‘Kiwi’.

Matthew Andrews

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