Despite mixed market appetite for risk-correlated currencies like the New Zealand Dollar, the Pound to New Zealand Dollar exchange rate is struggling to advance.
The Pound’s outlook is murky amid UK coronavirus and Brexit jitters, and today’s concerning UK job market report did little to change this. Analysts predict Britain’s job market will only look worse in the coming months.
Last Week: New Zealand’s Stronger Outlook Keeps It Resilient
The Pound made gains against many major currencies last week after the Bank of England’s (BoE) less dovish than expected 2020 outlook.
However, Sterling was ultimately unable to hold its best levels as concerns about Britain’s outlook persisted after Chancellor Rishi Sunak ruled out extending the furlough scheme.
On top of this though, the New Zealand Dollar has been becoming more resilient compared to other risk-correlated currencies.
Due to New Zealand’s effective handling of the coronavirus pandemic and strong New Zealand data, the ‘Kiwi’ has become more appealing than rivals like the Australian Dollar (AUD).
Three Things to Watch For This Week:
- Reserve Bank of New Zealand Decision
The Reserve Bank of New Zealand (RBNZ) will likely hold its August policy decision. Monetary policy will remain the same, but any shifts in the bank’s economic or coronavirus outlooks could be highly influential for NZD.
2. UK Growth Rate Report
Tomorrow will see the publication of Britain’s Q2 Gross Domestic Product (GDP) growth rate data, with UK growth expected to reveal a 20% contraction. However, if this figure surprises it may limit GBP losses.
3. Coronavirus Developments
There is speculation that Britain could further extend lockdown plans to limit ‘second wave’ damage, so markets are closely awaiting more signs from the government. Meanwhile, any changes in New Zealand’s situation could cause NZD weakness.
Tomorrow’s Reserve Bank of New Zealand (RBNZ) decision will be this week’s biggest news for NZD investors, while forecasts show UK GDP to contract -20%. Of course, shifts in coronavirus developments could impact risk sentiment and GBP/NZD movement as well.