Pound to New Zealand Dollar Recovers as Markets Avoid Risks
Updated 16:42 BST 24/07/2020:
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate continued to climb throughout Friday’s European session.
Supported by the day’s better than expected UK retail sales and PMI projections, the Pound (GBP) saw stronger demand.
GBP/NZD was able to advance even further, into the interbank region of 1.92, as investors became more hesitant to take risks.
Risk-correlated currencies like the New Zealand Dollar (NZD) were weakened by worsening coronavirus cases and economic data in the US. On top of this, US-China trade relations have been flaring up again.
The Pound to New Zealand Dollar exchange rate may struggle to advance much further though, amid Britain’s uncertainty filled coronavirus and Brexit outlooks weighing on Sterling.
(Originally published 10:17 BST 24/07/2020)
Pound to New Zealand Dollar Exchange Rate Recovers as NZD Rally Softens
Investors may be hesitant to keep buying the New Zealand Dollar (NZD) higher, as the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has more easily recovered from this week’s dips.
Since opening this week at the interbank level of 1.91, GBP/NZD has seen broadly mixed movement. At the beginning of the week, GBP/NZ briefly jumped to touch a July high of 1.93.
However, after that point the pair tumbled again. In the middle of the week, GBP/NZD hit lows of 1.90. This was the worst level for the pair in almost a year, since August 2019.
GBP/NZD has rebounded slightly since then, trending just above the week’s opening levels on Friday.
Next week’s economic calendar won’t be as influential for the Pound (GBP) or New Zealand Dollar. It will leave the pair reacting more to coronavirus and Brexit news.
Pound (GBP) Exchange Rates Find Support in Stronger than Forecast Retail Stats
For most of the week the Pound (GBP) has seen broadly mixed movement.
While some investors have been buying Sterling back from its cheapest levels in profit taking, concerns over the state of Brexit negotiations continue to weigh.
Investors once again bought the Pound back from its cheapest levels overnight, despite Brexit uncertainties. This morning’s UK retail sales stats only helped the Pound to hold its recovery.
Retail sales saw an even stronger than expected rebound in June. The yearly figure came in at –1.6% rather than the expected –6.4%. It bolstered hopes that Britain’s consumer activity was rebounding from the coronavirus pandemic.
According to Howard Archer, Chief Economic Adviser at the EY ITEM Club, uncertainty would likely persist:
‘However, there is uncertainty as to just how willing consumers will be to spend over the coming months. Indeed, persistent consumer caution is seen as a significant risk that could limit the UK recovery.’
New Zealand Dollar (NZD) Exchange Rate Rally Could Be Coming to An End
After months of strong performance, it seems as if the New Zealand Dollar (NZD) is struggling to advance much higher.
The New Zealand Dollar is a currency often correlated to market risk and trade sentiment. Amid hopes for a global coronavirus recovery, as well as New Zealand’s own impressive handling of the coronavirus pandemic, the New Zealand Dollar has been appealing.
However, analysts are speculating that the ‘Kiwi’s strong streak may have come to an end. This is making it easier for GBP/NZD to hold above its worst levels and avoid losses this week.
Markets are now growing concerned about the more long-term impact that the coronavirus pandemic will have on economies like New Zealand’s. Accoring to Martin Rudings, Senior Dealer at OMF:
‘The reality is that this virus is not going to be over and done with as quickly as everybody thought,’
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Unlikely to Find Brexit Support
The Pound to New Zealand Dollar (GBP/NZD) exchange rate is being buoyed a little from its worst levels at the end of the week. However, its potential for gains could remain limited.
While hopes for UK retail activity have risen, there is still broad uncertainty over the nation’s coronavirus outlook. On top of this, there has been little relief from the Brexit side of things.
The latest round of Brexit negotiations ended without any major progress being made. What’s more, officials have said that at this point a deal seems ‘unlikely’.
While there will be more talks in August, for now the gloomy Brexit outlook is likely to keep investors from wanting to buy the Pound (GBP) too much.
Some UK housing data due next week is unlikely to shift Pound strength too much. Meanwhile, the New Zealand Dollar (NZD) outlook could be influenced by next week’s New Zealand confidence data.
Any surprising shifts or developments in the global coronavirus situation could also influence risk sentiment and the Pound to New Zealand Dollar (GBP/NZD) exchange rate.