GBP/NZD Exchange Rate Trims Gains as BoE Maintains Hawkish Outlook
(Updated: 15:50, 28/06/23) The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading with only modest gains this afternoon after slumping from a three-year high earlier in the session.
At the time of writing GBP/NZD is trading up above 0.2% on the day, having traded with gains worth around 0.9% earlier in the session.
The pullback in GBP/NZD comes amid widespread weakness in the Pound, which has plunged in the wake of comments from Bank of England Governor Andrew Bailey.
Speaking on a panel of his peers, Bailey defended the BoE’s 50bps rate hike last week and signalled more tightening will be needed amid ‘clear signs of persistent inflation’.
The comments did little to dissuade fears that overtightening by the BoE could tip the UK into a recession.
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Pound New Zealand Dollar Exchange Rate Jumps in Nervous Trade
The Pound New Zealand Dollar (GBP/NZD) exchange rate trades with strong gains so far this morning. The pairing surging amid concerns over fresh US-China tensions.
At the time of writing the GBP/NZD exchange rate is trading at around NZ$2.891. Up almost 0.9% from this morning’s opening levels. But up almost one cent overnight.
New Zealand Dollar (NZD) Plummets amid Signs of Fresh US-China Tensions
The New Zealand Dollar (NZD) nosedived overnight on Tuesday amid reports the US is weighing up new restrictions on AI chip exports to China.
Washington is said to be concerned the chips could be used for hacking and weapons development.
The move will no doubt rachet up tensions between the world’s largest economies. Fears over which are weakening the appeal of the New Zealand Dollar and its antipodean cousin the Australian Dollar (AUD) this morning.
The pressures on the ‘Kiwi’ appear to be particularly acute. The currency falling almost 1% against many of its peers. This comes as New Zealand struggles to balance its relationship with China and the West.
China is a key trading partner for New Zealand, with roughly 30% of its exports designed for the country. Chinese President Xi Jinping spoke of the ‘great importance’ of China’s relationship with New Zealand following a meeting with NZ Prime Minister Chris Hipkins earlier this week.
NZD investors fear a fresh trade spat between the US and China could negatively impact New Zealand’s economy.
The New Zealand Dollar also remains vulnerable to losses amid expectations NZ interest rates have peaked.
The GBP/NZD has appreciated over 10 cents since the New Zealand Reserve Bank (RBNZ) signalled last month it is done with raising rates.
Pound (GBP) Capped by Recession Concerns
While it is up against the New Zealand Dollar, the Pound (GBP) is currency struggling to replicate this success against its other peers.
This comes as GBP investors remain unnerved by the prospect of the Bank of England (BoE) hiking the UK into a recession.
With this in mind, a speech by BoE Governor Andrew Bailey later this afternoon will be closely watched by markets.
If Bailey strikes a hawkish tone and suggests that more needs to be done to tackle the UK’s stubbornly high inflation rate, this could compound recession fears and pull the Pound lower.
Pound New Zealand Dollar Exchange Rate Forecast: Improvement in NZ Business Confidence to Boost the ‘Kiwi’?
Looking ahead, the Pound New Zealand Dollar exchange rate may retreat overnight with the release of the latest ANZ Business outlook survey.
The release is expected to report business confidence in New Zealand continued to improve this month. With the index expected to strike a new 14-month high.
Meanwhile, the second half of the week will see the publication of the UK’s latest GDP release.
The finalised figures for the first quarter are expected to confirm a modest 0.1% expansion. But could a last minutes revision inject some volatility into the Pound?