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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises as ‘Kiwi’ Hit by US-China Trade Tensions

June 11, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Edges Higher as US-China Trade War a ‘Zero-Sum Game’

The Pound New Zealand (GBP/NZD) exchange rate rose by 0.6% today and is currently trading around NZ$1.9314 on the interbank market.

The New Zealand Dollar (NZD) fell against the Pound (GBP) as the risk-averse ‘Kiwi’ was hit by news that US-China trade talks have once again flared up, with the US being accused of demanding ‘hundreds’ of changes to Chinese laws.

Shi Yinhong, an International Relations Scholar at Renmin University, summarised the two superpower’s central problems, saying:

‘From early May, China began to think that no deal might be better than a bad deal, and right now China and the US have fundamentally contradictory attitudes as to what would be a good deal. Slowly it has become a zero-sum game where neither party can accept something the other side would deem a good deal.’

With China being New Zealand’s closest trading partner, this has weighed considerably on NZ market confidence, providing a drag on the GBP/NZD exchange rate.

GBP/NZD Exchange Rate Rises as UK Unemployment Hits 44-Year Low

The Pound, meanwhile, benefited from the publication of the UK ILO unemployment rate figures for April, which came in at a 44-year low 3.8%.

Tej Parikh, a Chief Economist at the Institute of Directors (IoD), commented:

‘The buoyant labour market is still going strong for the UK economy, even as it weathers widespread political uncertainty. Businesses’ avid appetite for new hires has drawn many out of unemployment and inactivity into work, which has provided uplift to household incomes.’

Today also saw the release of the UK average earnings including bonus figures for April, which rose above the consensus 3.1% to 3.4%.

Matt Hughes, a Deputy Head of Labour Market Statistics as the Office for National Statistics, commented:

‘[T]he overall gap between men and women in hours worked is now the lowest ever - women now average about three-quarters of men's weekly hours, compared with around two-thirds 25 years ago.’

In political news, meanwhile, the Tory leadership race has remained in focus, and with Boris Johnson – a hard-Brexiter and former Foreign Secretary – being one of the favourites, this has heightened no-deal Brexit fears, leaving some Sterling traders feeling jittery.

GBP/NZD Outlook: Sterling Could Rise if UK Political Deadlock is Challenged

There are no notable UK or New Zealand economic data releases tomorrow, with traders in both looking to global and national political developments instead.

‘Kiwi’ investors, however, will be paying attention to Chinese economic data, and with the release of the Chinese consumer price index figures due for May, any signs of an improving Chinese economy could boost the NZD/GBP exchange rate.

The Pound New Zealand Dollar (GBP/NZD) exchange rate will likely be driven by Brexit developments, however, and with any signs of a breakthrough which could challenge the political deadlock, this could provide some further uplift for Sterling.

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