March 12, 2020 - Written by John Cameron
STORY LINK Coronavirus Pandemic Fears Leaves Pound New Zealand Dollar (GBP/NZD) Exchange Rate Flat
Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Muted on Pandemic Fears
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate remained muted, leaving the pairing trading at around NZ$2.0441.
The New Zealand Dollar remained under pressure today after the World Health Organization (WHO) declared the coronavirus outbreak was now a pandemic.
Added to this, risk appetite amongst investors slumped after President Donald Trump announced travel restrictions.
The announcement of the 30 day travel ban weighed on the risk-sensitive ‘Kiwi’ as it brought further questions of disruption to trade and the global economy.
Markets were largely disappointed with the announcement and Hamish Pepper, fixed-income and currency strategist at Harbour Asset Management argued the move provided little relief.
Pepper also added:
‘The ‘Kiwi’ continues to be surprisingly resilient given the environment we're in - a poor risk sentiment environment - and volatility has picked up materially.’
Sterling (GBP) Rises despite Emergency BoE Rate Cut
The Pound was left flat against a weaker New Zealand Dollar on Thursday, ahead of Prime Minister Boris Johnson’s emergency Cobra meeting.
The UK government is expected to announce whether or not it will switch tactics and move from the ‘containment’ to ‘delay’ phase.
However, gains in the Pound were limited after yesterday’s unexpected interest rate cut from the Bank of England (BoE).
This was the first cut out-of-schedule since the global financial crisis and the BoE’s first interest rate cut since August 2016.
Following the surprise rate cut, the UK’s Chancellor, Rishi Sunak announced a £30 billion economic stimulus package to help with the effects of coronavirus.
The joint efforts from the government and BoE provided Sterling with some support, and commenting on this, MUFG’s currency strategist, Lee Hardman said:
‘The government has stepped up to the plate with support for the economy and the co-ordinated action with the Bank of England is encouraging.’
However, on Thursday the Pound remained under pressure against a handful of currencies and in a note MUFG analysts wrote:
'The aggressive response to combat the coronavirus fallout by UK policymakers has failed to alter the pound’s recent weakening trend.
‘The coordinated loosening of fiscal and monetary policy should help to provide more support for the UK economy but is no silver bullet to prevent a sharp slowdown in the coming quarters.’
Pound New Zealand Dollar Outlook: Will NZD Slide as Markets Focus on Coronavirus Pandemic?
Looking ahead, the New Zealand Dollar (NZD) could slump further against the Pound (GBP) following the release of PMI data.
If February’s Business NZ PMI slumps further than expected below the 50 no-change mark, the ‘Kiwi’ will slide.
Meanwhile, the spread of coronavirus is going to remain the main catalyst for movement of the pairing.
If the risk-off mood continues due to the spread of coronavirus, the Pound New Zealand Dollar (GBP/NZD) exchange rate is likely to edge higher.
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TAGS: Pound New Zealand Dollar Forecasts