While movement was steady yesterday, the Pound to New Zealand Dollar (GBP/NZD) exchange rate has been climbing since last night. Investors are hesitant to keep buying the New Zealand Dollar amid anticipation for tomorrow’s Reserve Bank of New Zealand (RBNZ) policy decision.
Yesterday’s UK government plans to ease lockdown, while cautious, were not a big surprise to investors. The Pound remains appealing overall due to hopes that Britain’s economy will recover from the pandemic by late-2021.
Last Week: Coronavirus and Commodity Hopes Lead to Volatility
For most of last week, investors continued to pile into the Pound on speculation that Britain’s economy would recover from the coronavirus pandemic before other major economies do.
As for the New Zealand Dollar, it was able to benefit towards the end of the week by a sudden jump in sentiment towards risk and commodities.
Markets speculate that as economies recover, demand for products and commodities will rise and prices will surge. This boosted commodities and risk-sentiment, helping the New Zealand Dollar to recover its weekly losses against the Pound.
Three Things to Watch For This Week
- Reserve Bank of New Zealand (RBNZ) Decision
Tomorrow will see the Reserve Bank of New Zealand hold its February policy decision. If the bank is more hawkish on New Zealand’s outlook than expected, the New Zealand Dollar could strengthen and push GBP/NZD lower more easily.
- New Zealand Trade Balance
New Zealand’s January trade report will be published during Friday’s Asian session. Strong New Zealand trade data could make markets even more optimistic about New Zealand’s outlook.
- Coronavirus Developments
If the UK government’s restriction easing roadmap continues to be fairly well received, the Pound may hold recent highs more easily. Developments on New Zealand’s situation will of course remain influential.
The Reserve Bank of New Zealand policy decision is the biggest event of the week for New Zealand Dollar investors, and most of the week’s key UK news has come in already. This leaves coronavirus and central bank news in focus for now.