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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Dips as UK Business Leaders Demand Further Stimulus

May 27, 2021 - Written by John Cameron

GBP/NZD Exchange Rate Sinks as UK Hospitality Sector Remains ‘Far From a Champagne Moment’

The Pound New Zealand Dollar (GBP/NZD) exchange rate dipped by -0.1% today after business leaders urged Prime Minister Boris Johnson for fresh support to help the hospitality sector recover from the extended Covid-19 lockdown this year. The pairing is currently trading around NZ$1.93.

The Pound dipped today as concerns remain for the UK economy with the hospitality sector expected to boom in summer. But many business leaders, including Kate Nicholls, the chief executive of UK hospitality, said that the sector was ‘far from a champagne moment’.

Nicholls said:

‘At this point, any delay to the removal of restrictions on 21 June will be nothing short of catastrophic for a sector that has already lost £80bn in sales – two-thirds of its pre-pandemic revenue – over the past year.

‘Should there be one, it needs to be communicated well in advance and come with further support.’

The GBP/NZD exchange rate has also been undermined by growing concerns that new Covid-19 variants could push back the Government’s roadmap to ease lockdown measures.

Richard Partington, the economics correspondent at The Guardian, said:

‘The latest figures to 25 May show 2,493 people tested positive for Covid-19 across the UK, a gradual rise from 1,350 on 1 May.’

As a result, GBP investors have become more cautious about the outlook for the UK economy as Covid-19 cases continue to rise across much of the nation.

New Zealand Dollar (NZD) Exchange Rate Rises after Bullish RBNZ Policy

The New Zealand Dollar (NZD) continued to rise today after the Reserve Bank of New Zealand (RBNZ) held interest rates at a record low of 0.25% but hinted at potentially raising interest rates as early as the second half of next year.

Francesco Pesole, the FX strategist at ING, explains:

‘All the surprises came from the monetary policy statement, where the Bank published its updated projection for some key economic indicators. For the first time in a year, the RBNZ published the projected path for the OCR (the Bank’s policy rate). A market largely positioned for no change in rates until 2023 was taken off guard by forecasts of a rate hike in the second half of 2022.’

However, tensions between New Zealand and China have begun to limit the appeal of the risk-sensitive ‘Kiwi’.

New Zealand’s Minister of Foreign Affairs, Nanaia Mahuta, warned that the nation could be caught up in an Australia-China trade war.

Mahuta commented:

‘We cannot ignore, obviously, what's happening in Australia with their relationship with China. And if they are close to an eye of the storm or in the eye of the storm, we've got to legitimately ask ourselves - it may only be a matter of time before the storm gets closer to us.’

New Zealand relies heavily on trade with China, so any further escalation in trade tensions between the two countries would be NZD-negative.

GBP/NZD Exchange Rate Forecast: Could Rising UK Covid-19 Cases Weaken Sterling This Week?

Pound (GBP) traders will be keeping a close eye on the UK’s Covid-19 daily infection rates. Any signs of a rising number of cases would weaken the GBP/NZD exchange rate over fears that June’s further easing of lockdown measures could be pushed back.

New Zealand Dollar (NZD) investors are looking ahead to Friday’s release of the latest New Zealand consumer confidence figure for May.

If consumer morale continues to improve in New Zealand, then the NZD/GBP exchange rate would head higher.

However, if New Zealand-China trade relations continue to sour, then the ‘Kiwi’ would fall against the Pound.

The Pound New Zealand Dollar (GBP/NZD) exchange rate could fall this week if worries about a delay to next month’s easing of lockdown measures seems increasingly likely.

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