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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Sinks, Risk-On Sentiment Boosts ‘Kiwi’

October 10, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Eases, New Zealand Dollar Rises on US-China Trade Deal Hopes

The Pound New Zealand Dollar (GBP/NZD) exchange rate eased by -0.4%, with the pairing currently trading around NZ$1.934 after the ‘Kiwi’ benefited from heightened risk-appetite as US-China trade negotiations continue in Washington, US, today.

Michael Hirson, an Analyst from the political risk consultancy Eurasia Group, commented:

‘I think there’s still some chance that the two sides could come through this week of talks with a very fragile agreement to avoid further escalation, but it’s going to be under pressure almost immediately. What [US President Donald Trump] would be saying is ... we’re supporting U.S. farmers, we’re continuing to talk. But I’m not being soft on China, I’m keeping tariffs up. That’s kind of the path of least resistance right now for President Trump.’

The New Zealand Dollar rose against the Pound today due to what appears to be a ‘ceasefire’ in trade tensions between the world’s two largest economies. As a result, the ‘Kiwi’ was bolstered by a risk-on sentiment.

In NZ economic news, today saw the release of September’s ANZ monthly inflation gauge, which held at 0.3%.

GFB/NZD Exchange Rate Falls, UK Narrowly Avoids Brexit Recession

The Pound (GBP) fell against the New Zealand Dollar (NZD) following today’s release of August’s UK growth figure, which fell from 0.4% to -0.1%. However, UK markets have been relieved that it now looks less likely that the economy could face a recession, with better-than-expected growth three months ahead of August.

Rob Kent-Smith, Head of Growth at the Official of National Statistics, commented:

‘Growth increased in the latest three months, despite a weak performance across manufacturing, with TV and film production helping to boost the services sector. Services provided [the] majority of the growth over the three months, with production and manufacturing falling back.’

Meanwhile, the UK’s manufacturing suffered in August, with the month-on-month figure coming in below expectations at -0.7%.

Brexit developments remain in focus, however, with Prime Minister Boris Johnson in last-ditch negotiations with Irish Prime Minister Leo Varadkar today. However, with just a day to go until Boris Johnson is expected to secure a workable UK-EU deal, Sterling traders are becoming increasingly jittery on the prospect of more Brexit uncertainty.

GBP/NZD Outlook: Could Sterling Fall Further on Heightened No-Deal Brexit Fears?

New Zealand Dollar traders will continue to focus on US-China trade developments this week. Any signs of a compromise between the two superpowers would improve market sentiment in the risk-sensitive ‘Kiwi’.

With no UK economic data releases until next week, the GBP/NZD exchange rate will remain uniquely sensitive to Brexit developments. The Pound, however, could fall tomorrow if Boris Johnson fails to present a workable UK-EU Brexit deal due to rising no-deal fears.

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