Brexit Relief Slips from GBP/NZD Exchange Rate as UK Returns to National Lockdown

GBP/NZD’s attempts on a Brexit relief rally have already ran out of steam. As England and Scotland head into the strictest lockdown since March 2020, markets are once again anxious about Britain’s economic outlook.

As New Zealand continues to tackle the coronavirus pandemic well, the New Zealand Dollar has been able to keep benefitting from recovery hopes boosting risk-sentiment.

Last Week: Brexit Deal Relief Boosts the Pound

The Pound surged against many major currency rivals last week. The UK and EU’s Brexit trade deal, finally reached after years of tumultuous negotiations, was successfully passed into UK and EU law.

This meant that the threat of a no-deal Brexit had finally evaporated, removing one of the biggest downside risks in the Pound’s outlook.

However, higher market confidence in a recovery from the coronavirus pandemic boosted the risk-correlated New Zealand Dollar last week as well. This meant that GBP/NZD gains were ultimately limited.

Three Things to Watch For This Week:

  1. Coronavirus Developments

While there is not too much major UK or New Zealand data due for publication this week, developments in the coronavirus pandemic are likely to dominate movement regardless. More shocks in the UK lockdown could make the Pound even weaker.

2. UK Services and Composite PMI

Wednesday will see the publication of this week’s most influential dataset. The UK services PMI will indicate how well Britain’s most vital economic sector performed in a coronavirus-dampened holiday period last month.

3. Shifts in Risk-Sentiment

The New Zealand Dollar is a currency often correlated to market risk and trade sentiment. Any shifts in the global recovery outlook as coronavirus cases surge could dampen New Zealand Dollar demand.

GBP/NZD Outlook

Developments in the coronavirus crisis will remain the core focus for Pound to New Zealand Dollar exchange rate movement. Surprising UK data on Wednesday may cause movement as well.

Josh Jeffery

Contact Josh Jeffery