Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Muted on Risk-Off Mood
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained flat on Thursday after a drop in risk appetite. This left the pairing trading at around NZ$2.0072.
Investors flocked to safe haven currencies after China’s Hubei province reported a sharp increase in the number of new Covid-19 cases.
Using a new method to diagnose patients, cases rose by 14,840 on Thursday, weighing on risk appetite.
Added to this, the number of deaths in the province jumped by a daily record of 242, bringing the total death toll to 1,310.
Commenting on this, market strategist at Sumitomo Mitsui Trust Bank, Ayako Sera stated:
‘When you see numbers like this, you can’t help but move to risk-off trades, which means buy the yen and sell stocks.
‘If the authorities can reasonably explain this, things might calm down, but I expect risk aversion to continue.’
As New Zealand has extensive ties to China, trade in tourism, education and commodities are particularly vulnerable to any disruption caused by this outbreak.
Sterling (GBP) Flat as UK House Prices Jump to Three-Year High
The Pound saw little movement on Thursday as economic data calendars remained quiet at the end of the week.
However, investors still remain anxious about the future trading relationship between the UK and European Union.
Prime Minister Boris Johnson’s hardline approach to trade negotiations, and view that the country did not need to follow the bloc’s rules continued to weigh on Pound investors.
Meanwhile, GBP received a slight boost after data showed UK house prices rose by the most since 2017 in January.
This added to signs the economy may have rebounded following December’s election, something the Bank of England (BoE) were looking for before deciding whether or not to cut interest rates.
This also suggests an upswing in consumer sentiment as Brexit uncertainty was lifted.
Yesterday: New Zealand Dollar (NZD) Rises on Hawkish RBNZ
Meanwhile, the ‘Kiwi’ remained flat against Sterling after enjoying a boost on Wednesday following the Reserve Bank of New Zealand’s (RBNZ) interest rate decision.
The bank left rates unchanged, and hinted that it is done with easing monetary policy for the time being.
Today, Assistant Governor Christian Hawkesby said the bank would hold rates at a record low for a prolonged period of time, even if growth accelerates.
Speaking earlier today in an interview with Bloomberg, Hawkesby stated:
‘It would be healthy if people experienced some inflation above the 2% midpoint, just to illustrate that the full width of the range is available. We’re absolutely comfortable with using the inflation range.
‘If things are a lot worse, then the projections will look different and the policy response will look different. At the moment the markets are probably more relaxed than they were earlier in the month. But equally we know that it’s asymmetric. If the median is six weeks it can’t be a whole lot shorter than that but it could be quite a lot longer.’
Pound New Zealand Outlook: Will Weak PMI Data Send NZD Lower?
Looking ahead to the end of the week, the New Zealand Dollar (NZD) could slump against the Pound (GBP) following the release of PMI data.
If January’s Business NZ PMI remains in contraction territory, the ‘Kiwi’ will edge lower.
Meanwhile, NZD could suffer further losses if traders continue to seek safe haven currencies as the number of Covid-19 cases grows.
If China sees another spike of new cases across the country, the Pound New Zealand Dollar (GBP/NZD) exchange rate will rise.