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Pound New Zealand Dollar Exchange Rate News: GBP/NZD Pressured by Unrelenting Inflationary Pressures

November 2, 2022 - Written by John Cameron

Pound (GBP) Slumped on Cost-of-Living Crunch

The Pound (GBP) struggled for demand against almost all its rivals on Wednesday as the cost-of-living crisis deepens.

Food prices continue their surge as they rose by 11.6% in October, the fastest increase since 2005 when records began. Non-food prices also increased 4.1% from September, meaning shop prices in general rose 6.6% higher from this time last year. The Ukraine invasion and the subsequent energy crisis continues to push prices up.

Fresh food saw the biggest jump in prices, as the British Retail Consortium (BRC) reports that prices surged 13.3% YoY. More concerning for the UK is that inflationary pressures have yet to peak, with Andy Clarke, former chief executive of Asda, have warned that it is likely to get worse:

‘We’re seeing inflation numbers at over double-digit. There’s nothing we can see in the near term that suggests it’s going to go south of that. If anything, it’s going to go up.’

Meanwhile, further weighing on the Pound is the continuation of the ‘summer of discontent’, as workers for the Royal Mail have announced two 48-hour strikes planned before Christmas. Ongoing disputes over work conditions and pay will see postal workers staging strikes around Black Friday and Cyber Monday, the biggest online shopping events of the year.

Dave Ward, General Secretary of the CWU, has criticised the Royal Mail in offering a 7% salary increase over two years. But the CWU called the offer ‘derisory’, and Ward added:

‘Posties are in the fight of their lives against the Uberisation of Royal Mail and the destruction of their conditions.

‘But 115,000 of our members will not just accept this war on their livelihoods and their industry. They will never give up the fight to protect this industry and to protect their hard-won working conditions.’

New Zealand Dollar (NZD) Boosted by Risk-Positive Market Mood

Meanwhile, the New Zealand Dollar (NZD) enjoyed modest success as the market shifted to a less risk-averse mood ahead of the highly-anticipated interest rate decision from the Federal Reserve.

Risk-sensitive currencies such as the ‘Kiwi’ saw a boost when reports circulated of China potentially relaxing its strict zero-Covid policy. However, the unsubstantiated report could not be verified, and a Chinese Ministry spokesman refuted these claims.

Potentially souring the market mood are warnings from container shipping giant Maersk cautioning that global demand is slowing, with ‘freight rates having peaked’. Investors were told the worsening energy crisis, exacerbated by the prolonged Ukraine invasion, were badly affecting the global economy. Expectations of container demand could drop by 2% to 4% this year, as warning signs of a global recession steadily grow.

GBP/NZD Exchange Rate Forecast: Hawkish BoE Interest Rate Decision to Boost Sterling?

Looking ahead, and with no data for the rest of Wednesday, the Pound New Zealand Dollar could see further movement when the Bank of England (BoE) announce their rate decision. Market expectations of another 75bps interest rate could rally the Pound, but anything smaller could see Sterling tumble.

Elsewhere, data remains thin on the ground for the New Zealand Dollar for the rest of the week, so any news out of China could inspire movement. The Fed rate decision is likely to impact global market sentiment, which in turn could influence the risk-sensitive ‘Kiwi’.

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