The Pound New Zealand Dollar (GBP/NZD) exchange rate traded widely last week, as the New Zealand Dollar (NZD) was lifted by China’s Covid readjustments.
What’s Been Happening: NZD Buoyed by Chinese Covid Changes
The New Zealand Dollar initially endured headwinds last week. With Chinese anti-lockdown protests continuing, NZD was dragged down due to New Zealand’s close trade links with China.
Further weighing on the ‘Kiwi’ was the recent business confidence survey, which printed a sharp drop. It came as businesses in New Zealand continued to battle inflationary pressures and labour shortages.
On Thursday, the Chinese government announced that they would begin unwinding their stringent zero-Covid policy. As such, the ‘Kiwi’ began to strengthen as optimism rippled through markets and prompted a healthy risk appetite.
Meanwhile, the Pound (GBP) was embattled throughout much the week. A lack of data led investors to focus on domestic headlines, which painted a bleak picture for the UK economy.
However, despite spiralling food inflation and waves of industrial action, Sterling saw a boost at the end of the week amid hopes of a resolution to the Northern Ireland Protocol dispute.
Three Things to Watch Out for This Week
- China Covid Developments
With lockdowns being eased and the zero-Covid policy relaxed, a reopening of the Chinese economy is on the cards. If this continues, NZD may strengthen.
- UK Domestic Headlines
UK data is in short supply this week. As a result, headlines about the cost-of-living crisis or more strikes could weigh on GBP.
- Risk Sentiment
A return to risk-on trade could provide a lift for both currencies but may lean more towards supporting NZD.
Pound New Zealand Dollar Outlook
The Pound New Zealand Dollar exchange rate is off to a slow start this week. A lack of impactful data for either side of the pairing is likely to keep both fairly muted. However, any further news from China about how the government will relax its Covid policy may boost the ‘Kiwi’.