June 18, 2020 - Written by John Cameron
STORY LINK Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Falls as BoE Increases Quantitative Easing Programme
GBP/NZD Exchange Rate Falls as BoE is Dovish About British Economy’s Recovery
The Pound to New Zealand Dollar (GBP/NZD) exchange rate plummeted by 0.9% today, with the pairing currently trading around NZ$1.92.
Sterling suffered today after the Bank of England (BoE) was notably dovish in its approach to policy, announcing a further £100 billion to its quantitative easing programme to recover the British economy from the coronavirus crisis.
The BoE was also downbeat in its statement, saying:
‘There is a risk of higher and more persistent unemployment in the United Kingdom. Even with the relaxation of some Covid-related restrictions on economic activity, a degree of precautionary behaviour by households and businesses is likely to persist. The economy, and especially the labour market, will therefore take some time to recover towards its previous path.’
With no further signs of the British economy emerging out of the doldrums, GBP traders have become increasingly skittish.
Post-Brexit concerns have also weighed on Sterling today after it was revealed that the European Parliament had rejected any watered-down trade deal with the United Kingdom.
New Zealand Dollar (NZD) Edges Higher as US-China Trade Relations Improve
The New Zealand Dollar (NZD) mainly rose against the Pound due fears over the British economy, however, the ‘Kiwi’ is being plagued by both poor NZ data and rising fears of a potential second wave of coronavirus cases.
Martin Rudings, an adviser at OMF, commented:
‘The market is concerned about the rise in Covid numbers – I think that's what stopped the equities markets from rising.’
Meanwhile, US-China trade tensions also look set to balance out. After a 7-hour meeting between the two powers, there are signs of tensions being eased.
Taoran Notes associated with the Economic Daily newspaper in Beijing, commented:
‘Amid the current situation, that China and the US sat together to have constructive dialogue, regardless of any outcome, is a proactive move worthy of recognition.’
GBP/NZD Outlook: Could Positive UK Retail Sales in May Boost the Pound?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK’s retail sales figures for May. If these show any signs of improvement, we could see Sterling begin to crawl back some of its losses.
The New Zealand Dollar (NZD) will remains sensitive to risk-sentiment throughout the rest of this week. If US-China trade relations continue to improve, then we could see NZD head higher.
The GBP/NZD exchange rate will likely remain subdued however, with the UK’s economic outlook looking increasingly bleak as no-deal Brexit fears continue to linger.
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