The Pound to New Zealand Dollar (NZD) exchange rate is rising so far today, with the pairing trading around NZ$2.006 this morning.
However, the risk-averse ‘Kiwi’ continues to strengthen on hopes of a possible US-China trade deal and a vaccine for Covid-19.
Last Week: GBP/NZD Sinks as Fears Grow Over Possible No-Deal Brexit
The GBP/NZD exchange rate fell from highs of NZ$2.02 to around NZ$2.00 last week as the risk-sensitive New Zealand Dollar fluctuated on concerns for the global economy and the coronavirus pandemic.
The New Zealand Dollar struggled at the beginning of last week as Auckland stayed in lockdown while coronavirus cases rose. Added to this, Prime Minister Jacinda Ardern postponed New Zealand’s general election, which added to economic recovery uncertainty.
Meanwhile, Sterling was temporarily lifted at the start of last week after Downing Street announced that it was hoping to secure a post-Brexit trade deal with the European Union.
However, these hopes were quickly quashed by Michel Barnier, the EU’s chief negotiator, who said that the UK had criticised Downing Street’s poor performance in UK-EU trade talks.
Meanwhile, UK economic data releases appeared to show promising signs of recovery last week as inflation rose higher than expected and PMI data showed business activity grew at its fastest pace in seven years.
This failed to drive GBP exchange rate higher, however, because many analysts view the rise in inflation as temporary and worries over a possible UK unemployment crisis offset optimistic growth data.
Three Things to Watch Out for This Week
- Comments from the Bank of England (BoE)
Sterling traders will be keeping a close eye on speeches from the Bank of England’s (BoE) Chief Economist, Andrew Haldane, and the Bank’s Governor, Andrew Bailey this week. If they are notably dovish about the UK’s economic performance, we could see GBP suffer.
- US-China Trade Relations
The risk-averse New Zealand Dollar (NZD) will remain sensitive to US-China trade developments this week. Any signs of progress towards a trade deal would buoy the ‘Kiwi’.
- New Zealand Consumer Confidence
Thursday will see the release of New Zealand’s ANZ Consumer Confidence gauge for August. Any improvement could buoy confidence in the ‘Kiwi’ as hopes grow for the nation’s economic recovery.
The GBP/NZD exchange rate will likely remain subdued this week with concerns continuing to grow over the lack of progress in UK-EU trade talks. Additionally, with optimism continuing to climb on the possibility of a US-China trade deal, we could see the New Zealand Dollar edge higher.