Pound New Zealand Dollar (GBP/NZD) Exchange Rate Subdued as Global Covid Cases Soar

(Updated 16:37 29/12/21)

The GBP/NZD exchange rate has remained muted today, as Omicron variant fears continue to weigh on both currencies.

At time of writing the GBP/NZD exchange rate is at around $1.9741, which is mostly unchanged from earlier figures.

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Trends Sideways as Omicron Fears Persist

The Pound New Zealand Dollar exchange rate is trading within a narrow range so far today, as skyrocketing Covid-19 cases globally and fears over the Omicron variant continue to drive currency movement.

At time of writing the GBP/NZD exchange rate is at around $1.9748, which is virtually unchanged from this morning’s figures.

Pound (GBP) Muted as UK Sees Record-High Covid-19 Cases

The Pound (GBP) has traded within a narrow range today as record-high Covid-19 cases continue to weigh on the currency.

The UK reported a record of 129,471 new Covid-19 cases on Tuesday following news that Prime Minister Boris Johnson would not be introducing further measures to limit the spread of the virus.

Speaking on Monday, Johnson urged people to be cautious over New Year celebrations and warned that rules could be tightened further if necessary.

A shortage of lateral flow tests and walk-in testing slots threaten to undermine this stance however, and uncertainty surrounding this could place downward pressure on the Pound. If further restrictions are introduced in the new year then Sterling could fall further.

GBP may also continue to see Brexit headwinds this week, as European Commissions Vice President Maroš Šefčovič warned that ongoing threats by the UK to invoke Article 16 over the Northern Ireland Protocol were ‘enormously disruptive’.

Speaking to German news outlet Spiegel, Šefčovič had the following to say:

‘You try to achieve something together, and — boom — there’s the threat of Article 16 again. That goes to the heart of our relationship.’

New Zealand Dollar (NZD) Losses Limited by Returning Consumer Confidence

The New Zealand Dollar (NZD) rose overnight, but has dipped this morning as soaring global Covid-19 cases and fears over the Omicron variant keep the ‘Kiwi’ muted.

Despite reports that the recently discovered Omicron variant may prove less severe than initially feared, the continuing rise of Covid-19 cases has led investors to worry about the ongoing economic impact of the spike. The impact of this has likely dented confidence in the New Zealand Dollar, as Monday’s consumer confidence survey for December rose below forecasts. Data from retail analyst PriceSpy also indcated a lack of confidence as it showed Boxing Day spending had trended down by 10% since 2019.

Reports that trade and travel within the country is down may also affect NZD today, as hospitality and accommodation operators in Queenstown reported that Omicron fears and worries of an imminent lockdown. Business owners have reported that trade is down in comparison to 12 months ago.

GBP/NZD Exchange Rate Forecast: Will Either Country Introduce Fresh Restrictions in the New Year?

With no major data releases for either currencies expected this week, it’s likely that global and domestic concerns will affect both currencies.

Should the UK introduce any new restrictions in the new year then it will likely drive the Pound downward, with the uncertainty surrounding testing availability also likely to continue to weigh on the currency. The ongoing negotiations between the UK and EU regarding the Northern Ireland Protocol could also affect Sterling’s chances, with the possibility of an additional fall for the Pound should the discussions prove unproductive.

The commodity-tied New Zealand Dollar could rise higher, but the possibility of fresh travel restrictions or lockdowns will likely harm the currency’s chances.

Gareth Monk

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