GBP NZD Exchange Rate Skirts Historic Low as ?84 Billion Black Hole Opens

October 26, 2016 - Written by James Fuller

STORY LINK GBP NZD Exchange Rate Skirts Historic Low as ?84 Billion Black Hole Opens

The GBP NZD exchange rate is currently sitting dangerously close to an all-time low as a fall in market sentiment yesterday caused Sterling to spiral downwards.

Pound (GBP) Exchange Rate Sentiment Down on Stimulus Fears

The Pound (GBP) New Zealand Dollar (NZD) exchange rate collapsed yesterday as investors feared that further monetary easing was imminent following comments from British Chancellor Philip Hammond that he would be willing to allow additional quantitative easing should the Bank of England deem it necessary.

This has added to fears that the BoE will announce another cut in interest rates next week following the banks latest policy meeting. BoE Governor Mark Carney hinted that further cuts may be possible earlier in the month in order to counteract the ongoing drag on the Pound caused by ‘Brexit’ fears.

Pound New Zealand Dollar Exchange Rate Lower as £84 Billion Financial Black Hole Causes Additional ‘Brexit’ Anxiety

The Pound New Zealand Dollar exchange rate is likely to continue struggling in the immediate future following the news that the Chancellor is facing a £84billion black hole in public finances over the next five years.

The Resolution Foundation has calculated that the UK government will need to borrow more and will take less in tax receipts over the lifetime of the current parliament, thanks to the effects of ‘Brexit’ which is causing a ‘deterioration in the public finances’.

Matt Whittaker, chief economist at the Resolution Foundation, added:

‘We won’t know the OBR's verdict until 23 November but our analysis shows that the Chancellor may face a new £84 billion borrowing black hole and the prospect of breaking the fiscal rules inherited from his predecessor’
The government is currently set to miss targets to run at a £10billion surplus, laid out by the previous Chancellor George Osborne and will instead run at a deficit of £13billion in 2019-20, which is unlikely to improve prospects for the Pound.

New Zealand Dollar (NZD) Likely to Weaken as US Dollar (USD) Strengthens

The New Zealand Dollar (NZD) may find itself faltering as demand for the US Dollar (USD) rises as bets on a December rate hike from the Federal Reserve reach fever pitch. The risk-sensitive ‘Kiwi’ is likely to lose out as investors race to profit from the potential raise in interest rates.

GBP NZD Exchange Rate Forecast: Rise in British GDP Could Provide boost for Pound

The Pound may recover some of its losses against the New Zealand Dollar on Wednesday if Britain’s latest GDP data impresses. The UK’s GDP is currently forecast to remain at 2.1% in the third quarter so an unexpected burst of growth could see Sterling rally.

Meanwhile tomorrow also brings the only domestic data from New Zealand for the week and is predicted to show a slight rise in trade balance and export data, but a disappointing performance could provide the Pound some respite.

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