The Pound to New Zealand Dollar (GBP/NZD) exchange rate hit its best levels in around four months yesterday. Sterling has been able to keep climbing on UK recovery hopes thanks to weakness in the New Zealand Dollar.
Despite relatively high market optimism over a global coronavirus pandemic recovery, the risk and trade-correlated New Zealand Dollar has been less appealing over the past week. This is due to a resurge in demand for the US Dollar (USD).
Last Week: US Dollar Rebound Rattles GBP/NZD Exchange Rate
The volatile Pound to New Zealand Dollar exchange rate saw highly mixed movement last week. The pair tumbled until the middle of the week, when a surge in demand for the US Dollar made investors more hesitant to buy the New Zealand Dollar.
Following last week’s US stimulus and Non-Farm Payroll news, investors became more optimistic in the US outlook. As the New Zealand Dollar is often negatively correlated to the US Dollar, it weakened as the US Dollar rose.
The Pound’s rally on UK recovery hopes softened slightly, but the British currency was still appealing enough to keep climbing against a weaker New Zealand Dollar.
Three Things to Watch For This Week
- New Zealand Business PMI
New Zealand’s February business PMI will be published during Friday’s Asian session. If the data beats forecasts it could boost market appetite for the New Zealand Dollar.
- UK Growth Data
A slew of key UK economy figures, including trade balance, production data and growth rate results, will be published on Friday. Strong UK data could make markets even more optimistic about Britain’s potential recovery and help keep the Pound strong.
- Coronavirus Developments
Developments in the global coronavirus pandemic situation will continue to influence Pound and New Zealand Dollar movement as well.
With the coming week’s economic calendar fairly quiet, the focus will remain on shifts in market sentiment and coronavirus news – at least until UK growth data is published on Friday.