GBP/NZD Exchange Rate Edges Higher as UK’s Political-Economic System Stabilises
The Pound to New Zealand Dollar (GBP/NZD) exchange rate has continued to rise today after GBP rallied to one-month highs after Prime Minister Boris Johnson left hospital following intensive care treatment for coronavirus. The pairing is currently trading around NZ$2.06.
Sterling benefited from relief as the UK’s political-economic matrix now shows some stabilisation as Boris Johnson recovers and is expected to return to normal duties in the coming days.
Gaétan Peroux, an economic strategist at The Union Bank of Switzerland (UBS), was also optimistic about Sterling’s ‘upside potential’, commenting:
‘Despite its relative liquidity, the Pound was one of the G10 currencies most harshly punished by the dollar funding squeeze, possibly due to the UK’s large financial sector. As this issue seems to have been resolved, we expect Sterling to regain its lost ground by mid-year.’
However, the UK’s economy looks increasingly set for a recession with many banks, insurers and fund managers reporting a grim decline in optimism, according to a CBI survey.
Rain Newton-Smith, the Chief Economist at CBI, said that the survey took place between the social distancing measures were ramped up in the UK. Mr. Newton-Smith added:
‘Expectations for business volumes and headcount weakened, non-performing loans rose sharply and financial firms are planning heavy cuts to investment in the year ahead.’
New Zealand Dollar (NZD) Falls Despite Raft of Positive News
The New Zealand Dollar (NZD) failed to gain on the Pound (GBP) despite a raft of positive news, with China’s trade data beating forecasts and a falling new coronavirus infection count in New Zealand.
With China being New Zealand’s largest trading partner, we could see the GBP/NZD exchange rate shed some of its gains as the Chinese economy recovers after the was the first hit by the coronavirus.
The risk-sensitive ‘Kiwi’ is also benefiting from rising hopes that Europe’s coronavirus cases are plateauing. Any further positive news from the block would also buoy risk-sentiment and see NZD rise.
New Zealand’s Minister of Finance, Grant Robertson, also announced that Government spending would be used to support individuals, businesses and encourage employment by boosting jobs-rich industries.
Consequently, the ‘Kiwi’ investors reacted positively as the nation’s economic response to the coronavirus continues to look robust.
Mike Shirley, a trader at Kiwibank, commented that the NZD performed well against some of its beers due to being ‘underpinned by the general weakness of the US Dollar’.
GBP/NZD Forecast: Could Sterling Fall as the UK Enters Fourth Week of Lockdown?
The New Zealand Dollar (NZD) will remain correlated to risk-sentiment this week, with any further improvements in the Chinese economy or sinking coronavirus cases within Europe proving NZD-positive.
The GBP/NZD exchange rate will continue to be dictated by the UK’s coronavirus developments, with any further deaths from the virus proving Pound-negative as the nation enters its fourth week of lockdown.