GBP/NZD Exchange Rate Edges Higher as NZ Recession Fears Increase
The Pound New Zealand Dollar (GBP/NZD) exchange rate edged higher by 0.75% today. The pairing is currently trading around NZ$2.053. The ‘Kiwi’ fell after NZ’s President, Jacinda Arden, announced a month-long national lockdown to hold back the spread of the coronavirus.
New Zealand Dollar (NZD) investors are now concerned that New Zealand’s economy could face a recession in the near term.
Last week saw the Reserve Bank of New Zealand (RBNZ) warn in its statement:
‘The negative economic implications of the coronavirus outbreak have continued to intensify.’
The NZD/GBP exchange rate fell after the RBNZ announced quantitative easing measures which would see NZ$30 billion injected into the economy over a period of 12 months.
ANZ Bank Chief Economist Sharon Zollner commented:
‘This package is huge. Our analysis last week flagged the need for purchases of $15-20 billion per annum, if not more, and this announcement is even larger.’
Additionally, the ‘Kiwi’ continues to suffer from global coronavirus fears, with markets shunning the risk-sensitive currency in favour of safe-havens like the US Dollar and Swiss Franc instead.
Pound (GBP) Edges Higher Despite Darkening Economic Outlook
Today saw the Pound (GBP) shed some of Friday’s gains after Chancellor Rishi Sunak unveiled that the Government would pay up to 80% of private sector wages. However, with further economic restrictions expected, Sterling’s appeal is beginning to flag.
Yael Selfin, the Chief Economist for the UK at KPMG, was downbeat in his assessment, saying:
‘The Covid-19 pandemic is first and foremost a human crisis. But there will also be a very substantial negative impact on the global economy and the UK’s economic performance this year and potentially next. Until we know how and when the Covid-19 outbreak will end, the scale of the negative economic impact will be difficult to quantify.’
Now that the UK appears to be headed toward an Italy-style lockdown the UK’s economic outlook looks increasingly grim. Instead, Pound investors are paying close attention to Downing Street’s next announcement, which could place further restrains on Britain’s economy.
GBP/NZD Forecast: Sterling to Sink on Contracting UK Services PMI
Pound (GBP) investors will be awaiting tomorrow’s publication of the preliminary UK Services PMI report for March, which is expected to sink into contraction territory from 53.2 to 45. The UK’s manufacturing sector is also forecast to contract at 45 this month.
Meanwhile, the New Zealand Dollar (NZD) will also be compromised after the nation’s lockdown. Additionally, risk-sentiment is unlikely to improve in the near-term as markets continue to eye global coronavirus developments.
The GBP/NZD will shed some of its gains against its peers as the UK economic outlook is expected to darken. Furthermore, with Downing Street now expected to take further draconian measures to prevent the spread of the coronavirus, the British economy will be severely compromised going forward.