Pound to New Zealand Dollar Exchange Rate Rises despite Hopes of Sustained Chinese Economic Recovery

GBP Rises as US Political Uncertainty and Rising Covid-19 Cases Weigh on Risk Sentiment

The Pound to New Zealand Dollar (GBP/NZD) exchange rate rose by 0.3% today, with the pairing currently trading around NZ$1.960.

The New Zealand Dollar (NZD) remained subdued this morning despite signs of a strong Chinese economic recovery.

Yi Gang, China’s central bank governor, said:

‘The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.’

With China being New Zealand’s largest trading partner, this has buoyed hopes that New Zealand could soon benefit from the world’s second-largest economy’s recovery.

Nonetheless, a combination of US political uncertainty and rising global Covid-19 cases have clipped demand for the risk-averse ‘Kiwi’.

In New Zealand economic data, today will see the release of the NZIER Business Confidence report for the third quarter.

Any signs of New Zealand’s economy being significantly setback by the coronavirus pandemic would drag down the ‘Kiwi’.

Pound (GBP) Rises as Hopes for a Brexit U-Turn Buoy UK Economic Hopes

The Pound (GBP) edged higher today despite Prime Minister Boris Johnson’s combative tone on Brexit, saying that talks were pointless unless the European Union (EU) altered its stance on key issues like fishing and state aid.

GBP investors are still hopeful that a post-Brexit trade deal can be struck before the end of the year.

Michael Gove, the most senior of UK ministers, said that the door for a post-Brexit trade deal still remains ‘open’, however, sparking hopes of a trade deal before the year comes to a close.

Ricardo Evangelista, the senior analyst at ActivTrades, said:

‘The markets are dismissing the British government’s rhetoric that negotiations with the EU are over and the future trade relationship will be based on WTO [World Trade Organization] terms as a bluff.’

‘If investors’ stance in relation to sterling is anything to go by, then negotiations are far from over and the chances of a deal between the two parts being reached are reasonably high.’

Today will see the Bank of England’s (BoE) Deputy Governor for Financial Stability, Sir Jon Cunliffe, deliver a speech.

If Mr Cunliffe is downbeat about Britain’s ability to recover from the Covid-19 pandemic next year, then we could see the GBP/NZD exchange rate fall.

GBP/NZD Forecast: Could Brexit Hopes Continue to Boost Sterling This Week?

The New Zealand Dollar (NZD) will remain sensitive to global risk sentiment this week.

Consequently, the ‘Kiwi’ could begin to slide if uncertainty increases ahead of America’s presidential election next month.

However, the NZD/GBP exchange rate could head higher if China – the world’s second-largest economy – continues to show encouraging signs of recovery.

Brexit developments will continue to drive the Pound (GBP). As a result, we could see Sterling head higher if hopes grow over the possibility of a post-Brexit trade deal.

The GBP/NZD exchange rate will, however, fluctuate as investors eye Britain’s Covid-19 situation.

Any further lockdowns – or a sudden increase in infection rates – would be GBP-negative.

David Moore

Contact David Moore