Pound New Zealand Dollar (GBP/NZD) Exchange Rate Outlook: Flight to Safety Leaves Kiwi Grounded

Today: Pound New Zealand Dollar (GBP/NZD) Exchange Rate Jumps as Chinese Trade Data Slumps

The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading up around 0.3% today as the ‘Kiwi’ is hit by a flight to safety following some dismal Chinese trade data overnight.

Chinese exports and imports both tumbled in December, with exports falling the most since 2016 as worries over the economy take hold.

Imports contracted even more sharply, falling 7.6% on a yearly basis, which is concerning for global trade.

With China being such an important trade partner of New Zealand, this data has directly impacted sentiment in NZD, causing the currency to sink lower on world markets.

Currently, the GBP/NZD exchange rate is trading at a rate of NZ$1.8851 at the inter-bank rate.

Last Week: GBP/NZD Exchange Rate Falls as Brexit Worries Take Hold Again

The Pound New Zealand Dollar (GBP/EUR) exchange rate spent much of last week’s session trending lower as the return of the UK Parliament after the holiday recess saw worries over Brexit take centre stage for Sterling (GBP) once again.

It wasn’t until the very end of the week before Sterling attempted a comeback rally following anonymous reports allegedly made by a senior government minister that Brexit could be delayed if Theresa May’s agreement with the EU is rejected in the parliamentary vote tomorrow.

Throughout the week the GBP/NZD exchange rate had been trending lower due to an easing of global risk fears following positive noises coming from both the US and China during their trade talks in Beijing.

As this eased investor fears of an all-out trade war between the two economic giants, risk-on trades became the norm across currency markets as investors dropped safe havens and headed into higher yielding currencies, such as the ‘Kiwi’.

GBP/NZD Exchange Rate Outlook: Brexit Vote Set to Dominate Sterling this Week

This week it’s all about Brexit, as markets await tomorrow evening’s House of Commons vote on UK Prime Minister Theresa May’s UK-EU exit agreement.

As it stands it seems highly unlikely that the deal will pass the vote, meaning a number of different scenarios could ensue – with credible reports circulating that Brexit could be delayed until July at least, or rejected entirely.

Should there be a heavy defeat – one which might lead to Theresa May standing down or being replaced – it is likely that the GBP/NZD exchange rate will plummet, with the ramifications lasting for the rest of the week and beyond.

If the agreement is rejected by a narrow margin, Sterling could appreciate against the New Zealand Dollar as traders may have priced in a more crushing defeat.

Whatever the result, volatility in the GBP/NZD pairing is likely for the rest of the week, meaning what limited data releases there are – such as the NZ business confidence report and electronic card retail sales figures – are likely to be overlooked in favour of political considerations.

At the very end of the week, a likely already battered Sterling could sink lower when December’s UK retail sales are released, as they are expected to confirm that a slump hit the British High Street at the end of 2018.

 

Jason Heppenstall

Jason Heppenstall is a journalist and editor at TorFX.

Contact Jason Heppenstall


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