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Pound New Zealand Dollar Exchange Rate News: GBP/NZD Drops despite Promising Comments from UK Chancellor

March 22, 2022 - Written by John Cameron

GBP/NZD Plunges despite UK Chancellor’s Promising Comments

The Pound New Zealand Dollar (GBP/NZD) exchange rate is falling despite hopes UK Chancellor, Rishi Sunak, will have some ‘wiggle room’ to support citizens in his upcoming Spring Budget.

At the time of writing, the GBP/NZD exchange rate is trading at approximately NZ$1.9063, roughly down 0.4% from today’s opening levels.

Pound (GBP) Slips Ahead of Spring Statement Release

The Pound (GBP) is down against the New Zealand Dollar (NZD) during today’s session ahead of the publication of Rishi Sunak’s Spring Budget.

According to Sir Charlie Bean, Sunak may have up to £50 billion ‘to play with’ as data shows the UK government has borrowed less-than-expected so far this year.

Despite a sharp rise of borrowing in February, for the 2022 financial year government borrowing is at £138.4 billion, £21.2 billion less than forecast.

It is largely expected that Sunak will announce a fuel-duty cut to alleviate pressures from record-high fuel prices. Many MPs are also requesting Sunak defers the planned National Insurance rise.

Any relief for UK households could help to shore up consumer spending in the face of the UK’s cost-of-living crisis.

Sunak said:

‘The ongoing uncertainty caused by global shocks means it's more important than ever to take a responsible approach to the public finances.

‘With inflation and interest rates still on the rise, it's crucial that we don't allow debt to spiral and burden future generations with further debt.’

However some experts remain cautious of Sunak’s actions.

Martin Beck, chief economic advisor to EY ITEM Club, said:

‘Strong tax receipts and a year-on-year fall in public borrowing present a positive backdrop to the chancellor's Spring Statement on Wednesday. But high inflation and the consequences of geopolitical uncertainty signal tougher fiscal times ahead.’

Sterling is also benefitting from an improvement in market sentiment, following fresh hopes for a negotiated end to the war in Ukraine.

Volodymyr Zelenskiy has requested Vladimir Putin join him at the negotiating table, stating:

‘Without this meeting it is impossible to fully understand what they are ready for in order to stop the war.’

New Zealand Dollar (NZD) Climbs amidst Strong Commodity Prices

The New Zealand Dollar (NZD) is trading higher against the Pound (GBP) today due to increasing commodity prices.

As the Russia-Ukraine peace talks progress slowly, it could lead to a bigger rebound in commodity prices. Improved risk-appetite is also providing the ‘Kiwi’ with some traction.

Moreover, geopolitical tensions could further influence NZD exchange rates.

US President Biden has previously threatened to impose sanctions on China should they aid Russia during their ‘Special Military Operation’. The US has so far imposed travel bans on certain Chinese officials as a result of ‘recessive acts’.

Should additional sanctions be implemented on China, it may negatively impact NZD due to the close trading partnerships between New Zealand and China.

GBP/USD Exchange Rate Forecast: Will Peace Talks Support Risk Appetite?

Looking ahead, high level peace talks between Russia and Ukraine could help to bolster the Pound.

Moreover, the Pound may be buoyed by February’s consumer price index. Inflation is forecast to surge from 5.5% to 5.9% last month. Will a strong inflation reignite the Bank of England (BoE) rate hike bets in spite of last week’s dovish forward guidance?

Tomorrow, will also see the publication of the UK’s Spring Budget which could infuse additional volatility in the GBP/NZD exchange rate.

Meanwhile, an absence of New Zealand’s economic data is likely to leave the ‘Kiwi’ susceptible to market movement and external factors.

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