Approval of Covid-19 Vaccine for UK Distribution Not Enough to Lift Pound New Zealand Dollar (GBP/NZD) Exchange Rate
News of the Pfizer/BioNTech Covid-19 vaccine’s approval for use in the UK was unable to shore up the Pound to New Zealand Dollar (GBP/NZD) exchange rate.
While the imminent rollout of the vaccine could bring the Covid-19 crisis to an end sooner rather than later investors were more concerned by the latest Brexit-based developments.
As chief EU negotiator Michel Barnier commented that a UK-EU trade deal hangs in the balance, thanks to the persistence of three key issues, the mood towards Pound Sterling (GBP) soured notably.
With the odds of a no-deal scenario still appearing on the rise worries over the outlook of the UK economy picked up once again, with the prospect of a greater growth slowdown weighing heavily on sentiment.
Weaker NZ Terms of Trade put Pressure on New Zealand Dollar
Even so, the New Zealand Dollar (NZD) also came under a degree of pressure this morning thanks to a disappointing third quarter terms of trade report.
Export prices saw a much sharper decline on the quarter than forecast, clocking in at -8.3% rather than -3.5%.
Coupled with the marked contraction in the headline terms of trade figure this highlighted the increasingly fragile nature of New Zealand’s trade outlook.
This indicated that the economy has still come under pressure as a result of the Covid-19 crisis, thanks to weakness around the world and lockdown restrictions in other countries.
However, this was not enough to keep the GBP/NZD exchange rate from trending sharply lower throughout the morning.
Confirmation of UK Services Contraction May Dent GBP/NZD Exchange Rate
Support for the Pound could weaken further on Thursday if the finalised UK services PMI for November confirms a significant contraction on the month.
Evidence that the service sector experienced a major slowdown during the second national lockdown would raise the chances of the UK experiencing a fourth quarter gross domestic product contraction.
With the economy looking increasing on track to experience a double-dip recession investors may see little reason to favour the Pound against its rivals in the days ahead.
Unless the finalised PMI sees an upward revision from its initial reading the GBP/NZD exchange rate may well remain on the back foot.
New Zealand Dollar Vulnerable to Shifts in Market Sentiment
With no further New Zealand data releases on the calendar this week, though, the New Zealand Dollar could struggle to hold onto its footing against the Pound.
If the general sense of market risk appetite shows any renewed deterioration this would leave NZD exchange rates vulnerable to selling pressure.
On the other hand, with progress towards the dispersal of Covid-19 vaccines continuing easing worries over the pandemic may shore up market sentiment.
As long as investors see cause for confidence in the global outlook and the prospect of an end to the crisis this could bolster the appeal of the risk-sensitive New Zealand Dollar.