UK Growth Data, Risk Aversion, Help Pound New Zealand Dollar Exchange Rate Recovery

At the beginning of the week, the Pound to New Zealand Dollar (GBP/NZD) exchange rate plummeted amid concerns over a new more infectious coronavirus strain discovered in England. Since last night however, the Pound has been rebounding.

Despite concerns about more UK lockdown, the Pound was supported by today’s stronger than expected UK growth rate data. On top of this, market risk-aversion amid the new coronavirus strain is keeping the New Zealand Dollar weak.

Last Week: Brexit Hopes Help GBP/NZD Rebound

For much of last week, the Pound advanced on hopes that a Brexit deal was near.

This, combined with the risk-rally running out of steam, made it easier for the Pound to New Zealand Dollar exchange rate to recover some ground throughout the week.

Towards the end of the week it became clearer that the UK and EU would not reach a Brexit deal before the end of the week after all. This limited the GBP/NZD recovery attempt.

Three Things to Watch For This Week

  1. Coronavirus Developments

Developments on the new coronavirus strain are likely to dominate markets. If infections surge or the UK is forced into another full lockdown, the Pound may be in for more losses.

2. Brexit Developments

While coronavirus shock has taken market focus this week, there is still no UK-EU Brexit deal. With just over a week until the end of the Brexit transition period, the threat of a no-deal Brexit is now considerable.

3. Market Sentiment

Amid a lack of key data due in the coming sessions, shifts in risk and trade-sentiment driven by coronavirus and political news are most likely to drive the New Zealand Dollar.

GBP/NZD Outlook

With a new potentially more contagious coronavirus strain in Britain, the Pound to New Zealand Dollar exchange rate is likely to be dominated by developments in infections.

Josh Jeffery

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