July 22, 2020 - Written by John Cameron
STORY LINK Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Sinks as Hopes Grow for New Zealand’s Economic Recovery
GBP/NZD Exchange Rate Falls as Strong Dairy Prices Buoy ‘Kiwi’
The Pound to New Zealand Dollar (GBP/NZ) exchange rate fell by -0.7% today, with the pairing currently fluctuating around NZ$1.90.
The New Zealand Dollar (NZD) edged higher today as confidence continues to grow in New Zealand’s domestic economy. Strong dairy prices have also boosted the ‘Kiwi’ after the latest Global Dairy Trade auction outperformed expectations.
New Zealand’s Government is also holding back a $15 billion war chest to stimulate the economy. As a result, NZD investors are becoming more confident that the NZ economy is set to outperform many nations once it recovers from the Covid-19 crisis.
Imre Speizer, head of NZ strategy at Westpac, said:
‘The relative economic outlook is starting to get priced into exchange rates and the market has realised the US economic outlook is not going to be as good as the Australian or New Zealand ones.’
Covid-19 vaccine hopes have also buoyed appetite for risky assets like the ‘Kiwi’ today. This is despite rising fears that the US could be facing a worse-than-expected case of Covid-19 as the number of infections continue to grow in the world’s largest economy.
Pound (GBP) Falls as Post-Brexit Trade Hopes are Dampened
The Pound (GBP) suffered from rising fears over Brexit today, with sources reporting that the Government may be working along the assumption of a World Trade Organisation (WTO) exit.
As a result, GBP investors are concerned that UK-EU post-Brexit negotiations could be locked in a stalemate.
A senior source told The Telegraph:
‘The Government has been making it clear for a while now that it is prepared for no deal. Britain isn't going to budge on fundamentals like fishing rights, so it's all in the hands of the EU.’
Meanwhile, fears have been growing over the UK’s economic uncertainty, which could push the Bank of England (BoE) to take interest rates into negative territory. Consequently, Pound traders are becoming more pessimistic about the future of the British economy.
GBP/NZD Outlook: Could a Dovish BoE Weaken Sterling?
New Zealand Dollar (NZD) investors will be awaiting tomorrow’s release of the latest NZ trade balance figures for June. Any improvement in New Zealand’s exports could further buoy optimism in the economy and boost the ‘Kiwi’.
Pound (GBP) traders will be looking ahead to tomorrow’s release of the CBI Industrial Trends Survey of Orders for July. If this remains in negative territory however, we could see Sterling sink further.
Tomorrow will also see a speech from the BoE’s Jonathan Haskel, a member of the bank’s Monetary Policy Committee. Any dovishness about the UK’s economy would prove GBP-negative.
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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts