Pound (GBP) Falls against Peers Amidst Risk-Off Mood
(Updated 14:00, 26/08/21) The Pound (GBP) has fallen against the majority of its peers this afternoon as a risk-off market mood suppresses riskier currencies. A lack of UK data has exposed Sterling to losses as Covid developments remain the main driver of GBP movement.
Meanwhile, the New Zealand Dollar (NZD) has been able to climb on the hawkish tone of the Reserve Bank of New Zealand (RBNZ). In a press release yesterday, RBNZ officials outlined the additional monetary policy (AMP) tools that the bank developed in response to the coronavirus. The RBNZ has also hinted that it will start hiking in October and a 50bp move cannot be ruled out.
As the Pound falls further, the New Zealand Dollar is also finding support via the country’s vaccination progress. Although vaccines were not rolled out in New Zealand until March 2021, 21% of the population is now fully vaccinated, with approximately 20K second doses being delivered each day.
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Pound New Zealand Dollar Exchange Rate Flattens as Trading Sentiment Remains Muted
The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading flat as a lack of significant data leaves Sterling open to losses. Ongoing coronavirus concerns are also weighing upon GBP.
At the time of writing, GBP/NZD is trading at NZ$1.9752, virtually unchanged from today’s opening levels.
Pound (GBP) Faces Headwinds Amidst Risk-Off Mood
The Pound has fallen against the majority of its peers this morning as a risk-off market mood prevails. Bullish sentiment is waning as Covid concerns escalate and investors gear up for Federal Reserve Chairman Jerome Powell’s speech tomorrow at the Jackson Hole Symposium.
A handful of UK locations are likely to be added to the ‘red list’ today as Covid cases spike in response to mass gatherings. More than one thousand attendees of Latitude festival tested positive in the days after the festival.
In addition, supply chain issues have exacerbated bearish sentiment as major retailers warn that disruptions to deliveries of food and other goods may affect Christmas trading. Business leaders call for relaxation of post-Brexit visa rules to help avert the supply-chain crisis.
The Home Office argue for domestic hiring, however, asserting:
‘The British people repeatedly voted to end free movement and take back control of our immigration system. Employers should invest in our domestic workforce instead of relying on labour from abroad.’
Also weighing upon the Pound are US Dollar dynamics: investors are being drawn to the safe-haven currency as speculation over the Jackson Symposium inspires a risk-off attitude. The ‘Greenback’ is also accruing support over mounting coronavirus worries.
New Zealand Dollar (NZD) Maintains Two-Day High as Officials Remain Optimistic
The New Zealand Dollar also faces a lack of data today, relying upon market sentiment and news items to drive movement.
Despite the currency’s risk-on status, the ‘Kiwi’ is managing to cling on to gains made earlier in the week as trading sentiment was high. A higher beta G10 currency, NZD generally outperforms when risk sentiment is positive.
NZD is supported by the government’s confidence in its Covid-elimination strategy: speaking this morning, New Zealand’s Prime Minister Jacinda Ardern dismissed criticism of her ambitious targets, arguing that the country’s approach has saved lives and will continue to do so.
‘The measure of success in this pandemic is not just what happens in August of 2021. It’s what has happened since February 2020, when Covid arrived in New Zealand… we wanted to save people’s lives, and we have. We wanted to try and have people’s lives lived as normally as possible and even now, we’ve had some of the shortest periods of restrictions of any country.’
Yesterday’s data also helps to sustain NZD sentiment. Despite the trade balance in New Zealand switched to a NZD 402 million deficit in July, imports jumped 34.7 percent from a year earlier to a record high of NZD 6156 million.
GBP/NZD Exchange Rate Forecast: Movement to be Driven by Covid News, Market Mood
Looking ahead, a lack of significant data for either currency means the main driver of the Pound New Zealand Dollar exchange rate will likely be trading sentiment. As both currencies trade better amidst a risk-on market mood, escalating Covid concerns could apply pressure all round.
Also likely to affect the exchange rate, the outcome of the Jackson Hole Symposium will inspire US Dollar dynamics, with a subsequent effect on the ‘Greenback’s’ trading partners. If Fed Chairman Powell strikes a hawkish tone tomorrow, USD’s success could see GBP face losses.