November 11, 2020 - Written by John Cameron
STORY LINK GBP to NZD Exchange Rate Near Month and a Half Worst as RBNZ Optimism Keeps ‘Kiwi’ Strong
Despite a rise in demand for the Pound this week, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate has been trending lower as the New Zealand Dollar capitalises on this week’s market moods. Not only is the New Zealand Dollar benefitting from global political and coronavirus optimism, but the Reserve Bank of New Zealand (RBNZ) is now predicted to avoid negative interest rates despite months of speculation.
Following last week’s GBP/NZD tumble from 1.9561 to 1.9433, the pair is once again seeing notable losses this week.
GBP/NZD begun the week with a slump of over a cent. Sterling attempted to recover yesterday as it benefitted from market coronavirus vaccine hopes, but today the pair has been falling once again.
At the time of writing, GBP/NZD is trending near a low of 1.9227. This is the worst level for GBP/NZD since the second half of September, over a month and a half ago.
GBP Exchange Rates Struggle Against ‘Kiwi’ as Vaccine Rally Slows
The Pound has seen a surge in demand against many major rivals since yesterday. It comes as analysts speculate that Britain’s economy has more to benefit from a coronavirus vaccine than many other economies do.
Britain’s economy is heavily services focused. It has been hit particularly hard by the coronavirus pandemic, restrictions and lockdowns as a result.
As a result, the Pound became more appealing as markets digested an announcement from Pfizer Inc that coronavirus vaccine trials were going well.
On top of coronavirus vaccine hopes, the Pound has been supported by rising hopes that the UK and EU are getting close to finally reaching a deal on Brexit.
However, the Pound has been unable to sustain gains against a stronger New Zealand Dollar.
While this is largely due to the New Zealand Dollar’s own appeal, lingering coronavirus and Brexit uncertainties are limiting the Pound’s appeal as well.
According to Antje Praefcke, Analyst at Commerzbank, markets may be too optimistic about the chances of a soft Brexit:
‘I nonetheless remain sceptical: in the brief period of time until year-end it will be difficult to reach an agreement with the EU that would resemble even remotely to what full access to the internal market offers,
In that case the British economy would not only have to deal with the effects of the corona crisis, vaccine or no vaccine, but would also face the obstacles of trade being less free than during the transition period. That does not make me feel particularly positive for Sterling,’
NZD Exchange Rates Appealing as Markets Unwind Negative Interest Rate Bets
Despite the Pound’s appeal on coronavirus vaccine hopes, the New Zealand Dollar has been even stronger this week so far.
The New Zealand Dollar is a currency often associated with market risk and trade sentiment. However, it has performed far better than other risk-correlated currencies this week.
The ‘Kiwi’ has been benefitting from higher market sentiment amid a coronavirus vaccine rally, but it is also more appealing due to the latest Reserve Bank of New Zealand (RBNZ) speculation.
Due to rising hopes that the coronavirus pandemic could end in the foreseeable future, fears of negative interest rates are being doused somewhat.
Markets have been speculating for months that the RBNZ could be moving towards negative interest rates over the coming year. However, bets of negative rates are now fading as markets become more optimistic about the economic outlook.
Investors also believe the RBNZ is hesitant to introduce negative interest rates due to the RBNZ’s latest lending scheme.
In the RBNZ’s November policy decision today, the bank announced a funding for lending programme. While a loose monetary policy, the New Zealand Dollar was ultimately one of today’s best-performing major currencies.
GBP/NZD Exchange Rate Forecast: UK Growth Rate Could Bolster Sterling Optimism
While the Pound is appealing this week, it has been unable to sustain gains against a stronger New Zealand Dollar.
However, if the Pound becomes more appealing it could be more likely to advance against the ‘Kiwi’.
Tomorrow will see the publication of key UK ecostats. This includes UK growth rate, trade and production results.
If Britain’s data beats expectations, it could boost hopes that the economy will weather its second national lockdown. Amid hopes for a vaccine to be ready soon, this could be especially beneficial for the Pound outlook.
On top of this, the New Zealand Dollar may struggle to advance much further if markets calm from this week’s Reserve Bank of New Zealand (RBNZ)
If the ‘Kiwi’ falls back from highs, the Pound is even more likely to recover.
Of course, amid hopes that a Brexit deal will be reached soon, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate will continue to be driven by Brexit news as well.
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TAGS: Pound New Zealand Dollar Forecasts