The Pound to New Zealand Dollar edged higher on Tuesday, clawing back slight gains lost on Monday as traders focused on UK-EU trade talks. Risk-sensitive currencies such as NZD also took a breather as markets eyed the resurgence of coronavirus cases in the US.
What’s Been Happening: Upbeat US Jobs Data Boosts Risk Appetite
The New Zealand Dollar suffered losses at the start of the week despite data showing the British economy suffered its worst slump since 1979 and the central bank warned the economy may have contracted by 20% in the first six months of 2020.
The ‘Kiwi’ jumped as risk appetite increased after reports revealed a coronavirus vaccine being developed by BioNTech and Pfizer had shown potential during early human trials.
At the end of last week, the ‘Kiwi’ was able to make further gains following the release of upbeat US jobs data which indicated the global economy was on track for a swift recovery.
Three Things to Watch Out for This Week
- Risk Appetite
New Zealand Dollar traders will be watching the growing number of coronavirus cases in the United States. Although, if data from around the world continues to show positive signs the global economy is pulling itself out of the coronavirus downturn, it will offset this and boost the risk-sensitive ‘Kiwi’.
- Brexit Talks
Trade talks between the UK and European Union will also be in focus this week as markets await further clarity on a UK-EU trade deal. Upbeat reports suggesting the two sides are closer to reaching a deal will allow the Pound to make significant gains.
- UK Budget
The pairing could make further gains on Wednesday following the release of Chancellor Rishi Sunak’s supplementary Budget. If Sunak announces further stimulus measures to help offset the economic effects of the coronavirus, it will spark optimism and send GBP/NZD higher.
Looking ahead, the GBP/NZD exchange rate could reverse earlier losses and jump if upbeat trade talks between London and Brussels offset any gains in risk appetite seen over the week.