Pound New Zealand Dollar (GBP/NZD) Slumps as BoE Expects Economy Contracted in Q1
(Updated 13/4/23, 16:30)
The Pound New Zealand Dollar (GBP/NZD) exchange rate is plunging this afternoon after Bank of England (BoE) Chief Economist reveals concerns over growth expectations for the UK. Talking this afternoon, Pill commented:
‘Activity in the UK remains subdued, as the level of GDP was flat over the month in February. Bank staff continue to expect GDP to decline by 0.1% in 2023 Q1, (with) mixed signals from other surveys, suggesting the collective steer from business surveys continues to point towards uncertain growth expectations.’
At time of writing, the GBP/NZD exchange rate is around $1.9878, over a 1% plummet from this morning’s opening levels.
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GBP/NZD Quiet as Economy Saw Zero Growth
The Pound New Zealand Dollar exchange rate is subdued as the UK economy flatlined in February against an expected 0.1% growth.
At time of writing, the GBP/NZD exchange rate is around $2.0052, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined as Strike Action Held Back Growth
The Pound (GBP) came under modest pressure this morning after the Office for National Statistics (ONS) revealed that the UK economy flatlined in February. Against expectations of a modest 0.1% growth, GDP came in at 0%, as the economy saw zero growth last month.
Industrial action from civil servants and teachers are thought to have impacted economic activity, curtailing growth. Darren Morgan, Director of Economic Statistics at the ONS, believes that the largest civil service strike in years took a toll on the UK economy. Tens of thousands of teachers also held industrial action, further weighing on economic activity. Morgan commented on the data:
‘Construction grew strongly after a poor January, with increased repair work taking place. There was also a boost from retailing, with many shops having a buoyant month.
‘These were offset by the effects of Civil Service and teachers’ strike action, which impacted the public sector, and unseasonably mild weather led to falls in the use of electricity and gas.’
The largest contributor to a fall in economic activity is the drop in services, as it fell by 0.1% thanks to education stumbling by 1.7%. However, further concerning news is the possibility that the UK economy could have shrunk over the first quarter of 2023. Daniel Mahoney, UK Economist at Handelsbanken, said:
‘The underlying lackluster growth performance of the UK in February could signal that Q1’s quarterly GDP figure comes in marginally negative. Even if this were to happen, the UK would not be in a technical recession as Q4 2022’s growth figure was not in negative territory.’
New Zealand Dollar (NZD) Supported by Improving Risk Appetite
Meanwhile, the New Zealand Dollar (NZD) is enjoying mixed success this morning in the wake of positive Chinese trade data.
The world’s second largest economy, China, is enjoying renewed demand after easing its strict Covid policies. The trade surplus comfortably beat forecasts as exports rose sharply. Against expectations of a surplus of $39.2bn, trade surplus narrowed to $89.19bn in February. Exports unexpectedly leapt 14.8% YoY, marking the first increase in six months.
With an improving market mood in the wake of softer-than-expected US inflation, the risk-sensitive ‘Kiwi’ could climb further. The prospect of interest rate pauses, and eventual cuts, are buoying the market.
Pound New Zealand Dollar Exchange Rate Forecast: BoE Speech to Spur Sterling?
Looking ahead, the Pound New Zealand Dollar exchange rate could see further movement with a speech from the Bank of England (BoE) Chief Economist Huw Pill. In the wake of weaker-than-expected economic growth, Pill could drop hints on how the central bank continues to battle inflation. A more dovish rhetoric could see the Pound slip further.
Meanwhile, the New Zealand Dollar could continue to trade on market sentiment amid a lack of economic data. With a more upbeat market mood surrounding the prospect of global inflationary pressures easing, the ‘Kiwi’ could climb on improved sentiment.