US Presidential Transition to Go Ahead, GBP/NZD Touches 4-Month-Worst

Investors were more eager to take risks today, after it was indicated that US Presidential transition would go smoothly after all. After weeks of fears that a contested result could lead to political uncertainty or civil unrest, the Trump administration indicated it would cooperate with the incoming Biden administration.

The risk-correlated New Zealand Dollar jumped this morning as a result. This briefly knocked the Pound to New Zealand Dollar (GBP/NZD) exchange rate to its worst levels since July.

Last Week: Risk-Sentiment Keeps New Zealand Dollar Broadly Appealing

The New Zealand Dollar continued to capitalise on the market’s improving mood last week.

New Zealand’s lack of coronavirus infections, combined with expectations that a post-pandemic tourist boost would help New Zealand’s economy, made the ‘Kiwi’ particularly appealing among risk-correlated currencies.

The Pound did find some support on hopes that a UK-EU Brexit deal was closer to reality. The New Zealand Dollar’s risk-appeal ultimately pushed GBP/NZD lower throughout the week though.

Three Things to Watch For This Week

  1. Brexit Developments

Brexit remains the biggest focus for the Pound outlook. Though there have been no major developments yet this week, any new developments have the biggest potential to influence the Pound.

2. New Zealand Trade Data

New Zealand’s October trade data will be published during Thursday’s Asian session. They will give investors a better idea of how New Zealand’s key trade sector is recovering from the coronavirus pandemic.

3. Coronavirus Developments

The risk-correlated New Zealand Dollar could keep climbing on optimistic developments around coronavirus vaccine news.

GBP/NZD Outlook

The Pound to New Zealand Dollar exchange rate will remain under pressure if global sentiment continues to improve. However, optimistic Brexit news could lead GBP/NZD higher instead.

Josh Jeffery

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