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Covid-19 Drug Trial Sends the Pound New Zealand Dollar (GBP/NZD) Exchange Rate Lower

April 17, 2020 - Written by John Cameron

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls as Risk Appetite Jumps

The Pound New Zealand Dollar (GBP/NZD) exchange rate edged lower on Friday, leaving the pairing trading at around NZ$2.0737.

Risk appetite buoyed the risk-sensitive ‘Kiwi’ today, as reports about a successful coronavirus drug trial boosted sentiment.

Added to this, sentiment was also buoyed after US President Donald Trump announced plans to open up the United States’ economy.

Yesterday, President Trump announced that US states would emerge from the current lockdowns in a staggered approach.

The process would be dependent on strict virus testing and up to the discretion of individual states.

Speaking to reporters, Mr Trump said: ‘We are not opening all at once, but one careful step at a time.’

Meanwhile, the optimism for a coronavirus drug offset weak data from China today, which showed the country’s economy contracted for the first time since records began close to 30 years ago.

Commenting on today’s movement, Moh Siong Sim, currency analyst at the Bank of Singapore noted:

‘It’s this divided feeling between wanting to worry about the economic freeze and the hope that things might be re-starting quite soon.

‘We’re stuck in that limbo zone, but it does seem that the infection rate may have hit a peak at a global level [...] and if we find a cure, then there’s a cure for the economy as well.’

Sterling (GBP) Slumps as Government Extends Lockdown

Meanwhile, Sterling suffered losses despite yesterday’s announcement form the British government.

The government announced it would be extending the current lockdown by three more weeks as the UK could not risk the progress that had been made by easing restrictions.

Speaking on Thursday, Foreign Secretary Dominic Raab stated that there is currently no time frame for the easing of restrictions.

Meanwhile, according to a spokesman, Prime Minister Boris Johnson who is currently recovering from coronavirus has stated the government will not be requesting an extension to the Brexit transition period.

According to Derek Halpenny, head of research at MUFG:

‘Preparations must surely have taken a significant knock in recent weeks and investors are likely to price in an even more sparsely detailed trade deal if the deadline of year-end is maintained.

‘We see this as a reason for sterling recovery to remain more muted and remains a negative risk for the pound as COVID-19 risks hopefully start to recede.’

Pound New Zealand Dollar Outlook: Will Risk Appetite Continue to Boost the ‘Kiwi’?

Looking ahead to next week, the coronavirus pandemic is going to remain the main catalyst for movement of both the Pound (GBP) and the New Zealand Dollar (NZD).

If risk appetite continues to increase next week, sending traders away from traditional safe-haven currencies, it will provide the risk-sensitive ‘Kiwi’ with a further upswing of support.

Looking to Wednesday, the Pound could suffer some losses following the release of March’s inflation data.

If annual inflation slides further than expected in March due to the coronavirus pandemic, the Pound New Zealand Dollar (GBP/NZD) exchange rate will edge lower.

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