GPB/NZD Left Flat as US-China Relations Deteriorate Once Again

The Pound to New Zealand Dollar exchange rate was mixed at the start of the week, but remained flat on Tuesday. Data revealed that the number of people that arrived in New Zealand in May was the lowest for any month since May 1959 due to coronavirus border restrictions. Growing geopolitical tensions also weighed on the ‘Kiwi’ as US-China relations appeared to deteriorate.

What’s Been Happening: British Budget and Coronavirus

The New Zealand Dollar slumped against the Pound over the course of last week as the British currency was buoyed by UK Chancellor Rishi Sunak’s mini Budget. While he emphasised the country faces ‘profound economic challenges’ he focused on employment and launched a number of new schemes.

Although, GBP gains were largely limited as Brexit worries continued to plague the currency. German Chancellor Angela Merkel noted the EU should prepare for a no-deal scenario which weighed on Sterling.

Meanwhile, the ‘Kiwi’ struggled as investors worried about a second wave of the coronavirus as new cases surged in the world’s largest economy. Over the weekend Florida reported a record 15,000 cases, surpassing earlier records during the peak in New York.

Three Things to Watch Out for This Week

  1. New Zealand Inflation

The New Zealand Dollar could remain under pressure following the release of second-quarter inflation data. If consumer prices see a weaker than expected increase during the height of the pandemic, it will dampen NZD sentiment.

  1. UK Unemployment

With the emphasis Britain’s Chancellor has put on employment and avoiding an employment crisis, traders will be focused on the latest jobless rate. If the UK’s unemployment rate jumps higher than expected in May, Sterling will suffer losses.

  1. Coronavirus and Geopolitical Tensions

Risk appetite is likely to play an important role this week, as a risk-off mood it could offer the ‘Kiwi’ an upswing of support. However, renewed geopolitical tensions between the US and China and growing coronavirus cases in the US could soon reverse any NZD gains.

GBP/NZD Forecast

Looking ahead, the GBP/NZD exchange rate is likely to make gains if risk appetite declines and US-China tensions jump back into focus, although dire UK employment data will leave the pairing flat.

Millie Empson

Contact Millie Empson