GBP / NZD strengthens in risk-free market
The exchange rate for the New Zealand pound sterling (GBP / NZD) hit its highest level in five weeks as risk averse sentiment swept through markets on Wednesday, rocking the risk-sensitive ‘Kiwi’.
NZD exchange rates fell after market sentiment deteriorated overnight, offsetting the widely anticipated and expected interest rate hike from the Reserve Bank of New Zealand (RBNZ) from 0.25% to 0.5%.
Weak New Zealand Dollar helped GBP / NZD gain around 0.3% today to trade at 1.9653 at the time of writing.
Pound (GBP) limited by stagflation problems
Sterling exchange rates rose against some of the major currencies on a risk-free trading environment during Wednesday’s session.
However, the pound has come under pressure from concerns about UK economic growth and the threat of stagflation.
Concerns have grown as UK gas prices hit a new high, with the price more than doubling in the past month and rising 40% in the past 24 hours.
The impact on consumers and businesses of rising costs threatens Britain’s economic recovery and the possibility of stagflation.
Going into winter, businesses increasingly fear the shutdown of industries without government assistance.
President of the Energy Heavy Users Group, Richard Leese, said:
“We have already seen the impact of truly astronomical increases in energy costs on production in the fertilizer and steel sectors.
“No one wants to see a repeat in other industries this winter as UK energy intensive industries produce so many essential domestic and industrial products and are intrinsically linked to so many supply chains.
“The time has come for the government and Ofgem to take preventative measures. “
The surge in natural gas prices comes after the oil crisis has started to ease, particularly in the worst-hit region of London and the south-east of England. The Petrol Retailers Association (PRA) said 64% of stations in this region have both types of fuel, compared to 86% nationally.
New Zealand dollar (NZD) slides risk-free in trade after RBNZ rate hike
The New Zealand dollar is tumbling today amid widespread market risk aversion weighing on the risk-sensitive ‘Kiwi’.
The risk aversion sentiment overshadowed the widely anticipated decision by the RBNZ to raise interest rates from 0.25% to 0.5%.
The rate hike was the first in seven years, as the central bank said it planned to remove more stimulus as the economy continued to recover.
The RBNZ said:
“The Committee noted that further removal of monetary policy stimulus is expected over time, with future measures contingent on the medium-term outlook for inflation and employment.”
With the rate hike widely accepted by investors, the news had limited impact on the New Zealand dollar.
Soaring global energy prices, the US political deadlock on the debt ceiling and upcoming repayment deadline, fears of an economic slowdown and supply chain problems all weigh on appetite for market risk, lowering the risk-sensitive NZD.
New Zealand dollar to British pound forecast: GBP / NZD sensitive to fluctuations in risk appetite
GBP / NZD should continue to be dragged down by market risk appetite and evolving global energy and supply issues.
In a resurgent risk aversion climate, the New Zealand dollar may struggle to make any gains against the pound.
Global growth concerns persist and mounting inflationary pressures caused by rising gas prices and supply chain bottlenecks cloud sentiment.
Stagflation fears and fuel shortages in the UK that appear to be resolved are likely to continue to boost the sterling movement for the remainder of the week.