The Pound to New Zealand Dollar suffered losses at the start of the week, only for these to be reversed on Tuesday as risk appetite tumbled, leaving the pairing flat after the White House trade adviser, Peter Navarro stated the US-China trade deal was ‘over’.
What’s Been Happening: New Zealand Suffers Worst Contraction in 29 Years
The pairing slumped over the course of last week as risk appetite fluctuated as traders worried over the possibility of a coronavirus second wave and downbeat comments from the head of the US Federal Reserve.
Risk appetite continued to decline and boosted NZD despite further economic data showing New Zealand suffered its worst contraction in 29 years after the economy shrank by -1.6%.
The ‘Kiwi’ was able to make further gains against the Pound near the end of the week after the Bank of England (BoE) increased its QE programme by another £100 billion to help boost the economy.
Three Things to Watch Out For This Week
- RBNZ Interest Rate Decision
Looking ahead to Wednesday, the ‘Kiwi’ could suffer losses against the Pound following the release of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision. While the bank is not expected to lower rates further, economists expect the RBNZ to highlight the risks of the coronavirus pandemic.
- RBNZ Rate Statement
New Zealand Dollar traders will also be eyeing the bank’s rate statement for signs the bank is considering easing policy further. Weak Q1 growth data has emphasised the economy is not immune to the virus and with little scope for further bank stimulus, the RBNZ may renew its threat to take interest rates into negative territory which could send the ‘Kiwi’ lower.
- New Zealand Consumer Confidence
Looking to Thursday, NZD could make slight gains following a dovish RBNZ meeting if data reveals confidence has jumped in June. If ANZ’s Roy Morgan Consumer Confidence shows confidence has improved more than expected in June, NZD will receive an upswing of support against the Pound.
Looking ahead, the GBP/NZD exchange rate could edge higher this week if a dovish Reserve Bank of New Zealand (RBNZ) hints interest rates could be taken into negative territory.