Pound New Zealand Dollar Exchange Rate Steady on Early Omicron Data

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Holds as Omicron Optimism Fuels Risk-On Trade

The Pound New Zealand Dollar (GBP/NZD) exchange rate is holding in a narrow range on Thursday morning, trading around NZ$1.9633.

Market risk appetite has increased following reports that real-world data from a UK study suggests that the severity of the Omicron variant is milder than other coronaviruses, and is less likely to cause hospitalisation.

Pound (GBP) Bolstered by Early Omicron Studies

The Pound (GBP) has received support from the upbeat market mood on Thursday, although the currency is struggling against its more risk-sensitive peers.

Early data from real-world studies in the UK that suggest the Omicron variant poses a lower risk than previously feared has bolstered GBP exchange rates.

However, soaring UK Covid-19 cases and the impact on UK economic activity is capping some of Sterling’s gains.

Daily infections in the UK surged above 100,000 for the first time yesterday to record a new record high.

Spiralling Covid-19 cases are fuelling expectations for tougher measures to combat the spread of the Omicron variant and to bring down daily Covid-19 cases.

While UK Prime Minister Boris Johnson ruled out tighter restrictions before Christmas, he has hinted at stricter Covid rules after, adding the government would ‘not hesitate to act’ if needed.

Meanwhile, the Pound also had a boost from optimism over post-Brexit negotiations between the UK and EU.

According to the Independent, the UK and EU have agreed a ‘balanced’ fisheries deal on stocks for next year, increasing hopes that the consensus may spread to other Brexit related negotiations.

European minister Joze Podgorsek said:

“Thanks to good will and a constructive approach on both sides (the agreements sets) a good precedent for future negotiations with the UK”.

New Zealand Dollar (NZD) Jumps in Upbeat Trade

Following on from Wednesday’s solid gains, the New Zealand Dollar (NZD) is strengthening again today as a risk-on market mood continues to boost the risk-sensitive ‘Kiwi’.

Reports that a real-world study in the UK suggests the risk posed by the Omicron variant is lower than previously feared has fuelled increased market risk appetite.

Data from early studies in South Africa and the UK suggest symptoms from the Omicron variant are milder and people are less likely to need hospital treatment compared to other coronavirus strains.

According to research from Imperial College London, the risk of hospital admission is around 40% lower compared to the Delta variant, while Edinburgh University research points to a 65% reduction in the risk of hospitalisation with Omicron.

The study in South Africa also suggests fewer people need hospital treatment for the Omicron variant by 70-80%.

Meanwhile, the announcement that New Zealand will delay reopening quarantine-free travel in an attempt to curb the spread of Omicron has limited some of the New Zealand Dollar’s strength.

Pound New Zealand Dollar Forecast: Omicron Headlines to Dominate GBP/NZD Movement

With thinner trade in the lead up to Christmas and a lack of notable UK or New Zealand data releases, the GBP/NZD exchange rate will likely be driven by developments in the UK Covid-19 situation and more evidence on the impact on hospitalisation numbers by the Omicron variant.

UK coronavirus daily infections reaching fresh record highs may lead to far tighter Covid restrictions in the UK after Christmas.

With consumer confidence already appearing dented in the UK, the Pound may come under pressure due to fears over how much disruption the Omicron variant has had on UK economic activity, and the potential damage stricter measure may have.

Andrew Roberts

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