Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises as Covid-19 Breakout in Beijing Dampens Risk Appetite

GBP/NZD Exchange Rate Edges Higher as Fears Over China’s Second Coronavirus Wave Grows

The Pound to New Zealand Dollar (GBP/NZD) exchange rate edged higher today, with the pairing currently trading around NZ$1.94.

The New Zealand Dollar (NZD) has suffered from a sell-off of risky assets today after Beijing tightened its lockdown measures on signs of a new coronavirus outbreak. This follows a report of 36 new cases breaking out.

Xu Hejian, a spokesman for the Beijing city government, commented:

‘The risk of the epidemic spreading is very high, so we should take resolute and decisive measures.’

Meanwhile, China’s retail data for May fell 2.8% compared with the same month last year, while Chinese industrial production rose by 4.4%. Nevertheless, China’s data continues to fall well short of expectations.

As a result, investors have sought out safe-haven currencies today, with fears growing that the world’s second-largest economy could be hit by second wave of Covid-19.

NZD traders will be looking ahead to today’s release of New Zealand’s Westpac consumer survey for the second quarter. However, with the figure forecast to rise to 107.9, we could see the ‘Kiwi’ begin to rise.

Pound (GBP) Rises as UK Retail Sector Reopens

The Pound (GBP) rose against the New Zealand Dollar (NZD) today as shops reopen throughout England. As a result, hopes for the UK’s economic recovery have risen as the retail sector is set to improve.

Meanwhile, the UK Government has dropped its biggest hints yet that it could reduce the 2-metre physical distancing guidelines. This follows comments from Prime Minister Boris Johnson, who said there is now ‘more margin for manoeuvre’ over Covid-19.

Mr Johnson commented:

‘As we get the numbers down, so it becomes one in a thousand, one in 1,600, maybe fewer, your chances of being 2 metres, 1 metre or even a foot away from somebody who has the virus are obviously going down statistically, so you start to build some more margin for manoeuvre, and we’ll be looking at that.’

However, with growing fear for the British economy, with forecasts that the GDP could sink by 8% until 2023, the GBP/NZD could quickly fall.

Last week also saw The Organisation for Economic Cooperation and Development (OECD) predict that the UK economy would suffer more than any other developed country.

GBP/NZD Outlook: Could Dampening Risk Sentiment Drag Down the ‘Kiwi’?

New Zealand Dollar (NZD) investors will be looking ahead to tomorrow’s release of the ANZ monthly inflation gauge for May. Any signs improvement in New Zealand’s inflation last month would prove NZD-positive.

Meanwhile, GBP traders will be awaiting tomorrow’s release of the UK’s ILO unemployment rate report for April. However, if this continues to rise, we could see the GBP/NZD exchange rate fall.

The GBP/NZD exchange rate could continue to rise this week if Chinese data and Beijing’s coronavirus situation continues to worsen. As a result, the risk-averse New Zealand Dollar (NZD) would suffer from deteriorating risk sentiment.

David Moore

Contact David Moore