The Pound to New Zealand Dollar (GBP/NZD) exchange rate rose this morning following news that China’s factory growth had slowed last month. With China being New Zealand’s largest trading partner, this has sparked concern for the economy going forward.
What’s Been Happening: GBP Rises on Growing Confidence in UK Economy
The Pound performed strongly against the New Zealand Dollar during last week’s session, despite struggling in the first half.
Confidence continued to grow in the UK’s economy thanks to the Government’s swift rollout of Covid-19 vaccines. The UK is now expected to be one of the few major economies to reopen in the next few months.
In UK economic data, last week saw the UK’s unemployment rate rise by 5.1%.
Nonetheless, with the UK’s economy expected reopen in a few months this failed to significantly weigh on the GBP/NZD exchange rate.
However, the risk-sensitive New Zealand Dollar also benefited from improving global risk sentiment.
US President Joe Biden’s substantial $1.9 trillion coronavirus stimulus programme appeared to be gaining momentum, passing a critical vote from the House of Representatives.
As a result, US stimulus hopes contributed to increased demand for riskier assets like the ‘Kiwi’.
NZD traders remained cautious, however, following reports of more cases of Covid-19 being found in New Zealand’s biggest city, Auckland.
Last week also saw the Reserve Bank of New Zealand’s Governor Adrian Orr maintain his wait-and-see approach.
Mr Orr said that for the foreseeable ‘the Committee [had] agreed that it remained appropriate for fiscal policy to play the primary role in bolstering economic outcomes, given the nature of the economic shock.’
Three Things to Watch Out for This Week
- UK Budget Announcement
All eyes will be on Chancellor Rishi Sunak this week as he is due to announce the 2021 Budget on Wednesday. More fiscal support could drive up the GBP/NZD exchange rate this week.
- RBNZ Governor Speech
Thursday will see another speech from the RBNZ’s Governor Adrian Orr. Any signs of a more bullish approach to monetary policy would boost the ‘Kiwi’.
- US Stimulus News
The risk-sensitive ‘Kiwi’ will continue to be driven by global risk sentiment this week. As a result, we could see the NZD exchange rate rise on any further signs of progress for US President Joe Biden’s Covid-19 stimulus plan.
The GBP/NZD exchange rate will mainly be driven by Chancellor Rishi Sunak’s 2021 Budget announcement this week. But any further signs of Covid-19 cases dropping in the UK would also bolster confidence in the UK’s economy for the months ahead.