The Pound to New Zealand Dollar exchange rate rallied on Tuesday morning after this week’s announcement from New Zealand Prime Minister. Jacinda Arden announced the country’s general election would be postponed as Auckland remained in lockdown due to a jump in coronavirus cases.
What’s Been Happening: RBNZ Warns of Negative Interest Rates
Last week saw the New Zealand Dollar struggle after the Reserve Bank of New Zealand (RBNZ) expanded its bond-buying programme. Although, the central bank also warned interest rates would have to plunge into negative territory if the country went back into lockdown.
Meanwhile, Sterling made gains despite the country suffering the worst fall in employment since the financial crisis. Following this, growth data revealed the UK suffered a record -20.4% contraction in the second quarter, making it the steepest decline of any major economy so far during the coronavirus crisis.
However, the pairing edged lower at the start of this week after the US-China Phase 1 trade deal review meeting was postponed and boosted risk appetite as the deal was left intact.
Three Things to Watch Out for This Week
- UK Inflation
The Pound could make some gains following Wednesday’s release of the latest UK inflation data. If July’s Consumer Price Index (CPI) shows further signs the economy is recovering from the coronavirus-induced recession, it will buoy Sterling sentiment.
- US-China Tensions
As New Zealand’s largest city remains under lockdown, traders are likely to remain cautious about buying into NZD. Any exacerbation of tensions between Washington and Beijing this week after the Phase 1 review was postponed could weigh on risk appetite and send the riskier ‘Kiwi’ lower.
- UK Services PMI
The Pound could make further gains against a weaker ‘Kiwi’ at the end of the week if the latest flash PMI data from Britain shows both the eagerly-watched services and manufacturing sectors expanded more than expected as lockdown measures were eased further in August.
Looking ahead, the GBP/NZD exchange could continue to make gains thanks to upbeat data from Britain while geopolitical tensions and rising coronavirus cases weigh on the ‘Kiwi’.