Dovish RBA Minutes Sends GBP/NZD Higher

The Pound to New Zealand Dollar (GBP/NZD) exchange rate edged higher on Tuesday despite an upswing in global optimism sparked by upbeat reports about potential coronavirus vaccines and relief after EU leaders finally managed to reach a deal on a coronavirus stimulus package. However, this morning’s dovish minutes from the Reserve Bank of Australia (RBA) offset this and weighed on the ‘Kiwi’.

What’s Been Happening: Chinese Retail Sales Offsets Vaccine Optimism

The New Zealand Dollar remained under pressure at the start of last week as comments from the Reserve Bank of New Zealand (RBNZ) sparked fears over negative interest rates.

However, this was soon offset by reports revealing an experimental vaccine from Moderna Inc produced immune system responses in healthy volunteers.

Although, the Pound was able to make gains against NZD at the end of last week following dire Chinese retail sales data. The downbeat data weighed on risk appetite and dampened hopes for a quick global economic rebound and poured cold water on optimistic reports about a coronavirus vaccine.

Three Things to Watch Out for This Week:

  1. Risk appetite and Relief Bills

Risk appetite will remain in focus, as traders continue to fret over rising coronavirus cases. However, further optimistic reports about potential Covid-19 vaccines and support from a $1 trillion coronavirus aid bill from US Congress after the European Union reached a ‘historic’ deal on a stimulus plan will boost risk appetite. This will benefit the risk-sensitive ‘Kiwi’ this week.

  1. New Zealand Trade Data

The New Zealand Dollar is likely to suffer losses during early trading on Friday as June’s trade balance data is released. If the latest exports data disappoints traders and signals further weakness caused by the coronavirus crisis, it will send NZD lower.

  1. Flash UK Services PMI

Looking at the end of the week, Sterling may be able to make significant gains following the release of flash PMI data. If the closely-watched services sector returns to growth in July it will buoy GBP.

GBP/NZD Forecast

Looking ahead, the GBP/NZD exchange rate could edge higher as New Zealand’s trade data disappoints investors and Britain’s service sector rebounds and returns to growth in July.

Millie Empson

Contact Millie Empson