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Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Rises as US-China Trade Tensions Weigh on ‘Kiwi’

August 13, 2020 - Written by John Cameron

GBP/NZD Exchange Rate Edges Higher as US-China Tensions Intensify

The Pound to New Zealand Dollar (GBP/NZD) exchange rate rose by 0.6% today, with the pairing currently trading around NZ$1.97.

The New Zealand Dollar (NZD) has suffered from a sell-off of risky assets today following reports of an escalation in US-China trade tensions. As a result, the risk-sensitive ‘Kiwi’ has suffered as China is New Zealand’s largest trading partner.

Shi Yinhong, a professor of international relations at Renmin University in Beijing, explains:

‘The Chinese side — the whole world — is speculating that Trump could make some even more severe adventures in his China policy to save his prospect of re-election.’

New Zealand has also reported 14 new cases of Covid-19 just a day after the nation’s largest city, Auckland, went back into lockdown.

Meanwhile, Prime Minister Jacinda Ardern appeared to be concerned about the situation, saying, ‘We can see the seriousness of the situation we are in. It’s being dealt with in an urgent but calm and methodical way’.

Pound (GBP) Rises Despite Growing Concerns Over UK’s Economic Recovery

The Pound (GBP) rose against the ‘Kiwi’ today owing to a lack of economic data following yesterday’s dismal UK GDP figure for the second quarter. The report showed that Britain had entered its deepest recession since records began.

UK Chancellor Rishi Sunak commented:

‘I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here’.

Meanwhile, Sterling traders are becoming increasingly concerned after it was revealed that footfall in London’s West End was down two-thirds compared to last year. Consequently, this has sparked fears for the UK’s retail sector in the months ahead.

London Mayor Sadiq Kahn commented:

‘For decades central London has been the economic engine of the UK, a cultural powerhouse and a gateway for global tourism to the UK. But it now faces a real existential threat from the Covid-19 pandemic.’

However, owing to a quiet day on the UK’s economic front, Sterling traders appear to have heaved a sigh of relief. Nevertheless, with signs of a growing number of UK Covid-19 cases, we could see the GBP/NZD exchange rate’s gains being short-lived.

GBP/NZD Outlook: Could the ‘Kiwi’ Suffer as US-China Trade Tensions Escalate?

New Zealand Dollar (NZD) investors will be keeping a close eye on US-China developments. If tensions intensify between the world’s two largest economies, however, we could see the ‘Kiwi’ suffer.

Pound (GBP) traders, meanwhile, will be looking ahead to Sunday’s release of the Rightmove house price index for August. Any signs of a struggling British economy would prove GBP-negative.

The GBP/NZD exchange rate could continue to rise this week if the New Zealand Dollar (NZD) continues to be besieged by concerns for the global economy.

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