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Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Falls as NZ Economy Expected to Recover Better Than Most

June 29, 2020 - Written by John Cameron

GBP/NZD Exchange Rate Dips as ‘Kiwi’ Buoyed on Covid-19 Vaccine Hopes

The Pound to New Zealand Dollar (GBP/NZD) exchange rate fell by -0.3% today, with the pairing currently trading around NZ$1.91.

The New Zealand Dollar (NZD) benefited from growing hopes of a Covid-19 vaccine today, with a Chinese company unveiling positive results in its initial candidate trials. As a result, the risk-sensitive ‘Kiwi’ has gained on hopes for the global economy’s recovery should the vaccine prove effective.

Meanwhile, reports that New Zealand’s economy is set to emerge from the coronavirus pandemic better than most has boosted sentiment in the New Zealand Dollar.

S&P Asia-Pacific chief economist Shaun Roache commented:

‘New Zealand definitely is one of those economies that has exited the most severe periods of the pandemic first, and that clearly was just because what that allows the economy to do is reopen those face-to-face service activities that are so important for the labour market, and that hopefully should get jobs restarted people can go back to work.’

However, rising cases of coronavirus both in America and beyond have caused concerns of a possible second wave of the virus. Consequently, investors are remaining cautious as this could be bad news for the global economy.

Pound (GBP) Falls as UK-EU Brexit Talks Could End in September

The Pound (GBP) fell against many of its peers today after UK Mortgage Approvals fell to record lows of 9,273 today. However, some analysts are positive that these will improve now that the UK’s coronavirus lockdown measures and guidelines have been eased.

Mark Harris, the chief executive of the mortgage broker SPF Private Clients, said:

‘Covid-19 has had a devastating impact on the mortgage and property markets, so it is no surprise that lending was weak in May, with approvals for house purchase falling.’

‘With lockdown meaning that lenders were unable to send valuers out to physically view properties, the number of mortgages approved fell considerably.’

Meanwhile, Brexit concerns have returned after Downing Street hinted that it will be aiming at September to wrap up UK-EU trade negotiations. As a result, investors are becoming increasingly worried about the possibility of a no-deal Brexit in December.

Prime Minister Boris Johnson has also been dovish about the UK, saying that the coronavirus had been a ‘disaster’ for the nation. Some investors took this as indication a dire outlook for the British economy, leaving the GBP/NZD exchange rate under pressure throughout today’s session.

GBP/NZD Outlook: Could Improving Risk Sentiment Buoy the New Zealand Dollar?

The New Zealand Dollar (NZD) will continue to be driven by risk sentiment this week. Any signs of success with a vaccine for the coronavirus or an improving global economic situation would prove NZD-positive.

Tomorrow will also see the release of the ANZ Business Confidence figure for June. However, with this likely to remain in negative territory we could see the New Zealand Dollar suffer.

The GBP/NZD exchange rate will likely remain in the doldrums, however. With post-Brexit woes and uncertainty ahead for the British economy, it’s possible that markets will avoid Sterling throughout the course of this week.

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