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Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Rises despite NZ Exports to China up 27%

July 24, 2019 - Written by John Cameron

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises despite Wider than Expected NZ Trade Surplus

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate rose by around 0.4%, and the pairing is currently trading at an inter-bank rate of NZ$1.8607.

On Wednesday data revealed that the New Zealand trade surplus was wider than forecast in June, rising by $365 million.

Stats NZ showed exports were buoyed by logs and imports slumped to the lowest level in 16 months.

Despite falling prices, logs, wood and wood articles led the increase in exports, up 16% compared to June 2018.

Exports rose 2.8% compared to last year, rising to $5.01 billion while imports slipped 10% to $4.65 billion.

Further data showed exports to China was up 27% compared to June 2018 thanks to increases in untreated logs, milk powder and beef.

Commenting on this, Internal Statistics Manager Geraldine Duoba said:

‘Strong growth in exports to China continues to offset a slowdown in the value of sales to other key markets such as Australia and the EU.’

Sterling (GBP) Rises as Boris Johnson Prepares to Take Office

Meanwhile, on Tuesday it was announced that Boris Johnson was the winner of the Conservative Leadership contest.

Beating his rival Jeremy Hunt by gaining 66% of the votes, Johnson is expected to take the reins from Theresa May later this afternoon.

It is likely Sterling is benefitting from Johnson’s win after months of continued Brexit uncertainty.

However, the pairing could continue to fluctuate if there is further political uncertainty.

Reports have suggested that Jeremy Hunt has refused a demotion from Johnson, who offered him the position of defence secretary.

While it would not be detrimental for Johnson to have Hunt resign, it could cause the Pound to slip as this would seriously undermine his claims he is going to reunite the Conservative Party.

Reports of US-China Face-to-Face Talks Fail to Buoy NZD

On Tuesday, White House Economic Advisor, Larry Kudlow said that it was a good sign face-to-face talks were starting once again.

Unnamed sources revealed US officials are to travel to Beijing, which likely increased investors’ risk-appetite.

Speaking to reporters, Kudlow stated:

'As I read it, it looks like there will be a trip to China and we expect, we hope strongly that China will very soon start buying agriculture products, No. 1 as part of an overall deal and No. 2 as a goodwill gesture.'

However, the risk-sensitive ‘Kiwi’ slumped against the Pound on Wednesday morning.

Pound New Zealand Dollar Outlook: Will US-China Trade Talks Buoy NZD?

Looking ahead to this evening, it is expected that Boris Johnson will announce some members of his Cabinet.

Sterling could slide depending on who Johnson appoints and if there are signs he could struggle to unite the Tory party as promised.

Meanwhile, as there is a lack of economic data from New Zealand, it is likely any developments in the US-China trade talks will cause the ‘Kiwi’ to fluctuate.

If a date for face-to-face talks in Beijing is announced, risk-appetite could rise and the Pound New Zealand Dollar (GBP/NZD) exchange rate could fall.

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