GBP/NZD Exchange Rate Trends Near Month’s Worst Levels as Sterling Run Stalls
The Pound’s (GBP) broad weeks-long rally seems to be taking a pause for now, and the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is tumbling as a result. The market outlook for the New Zealand Dollar (NZD) continues to improve.
After opening this week at the level of 1.9190, GBP/NZD briefly attempted to advance. However since the middle of the week the pair has been falling and has been thus far unable to recover.
At the time of writing on Friday morning, GBP/NZD is trending near a low of 1.8948. This is the worst level for GBP/NZD since the beginning of February, over three weeks ago.
Next week will be fairly quiet for economic data, but developments in the coronavirus pandemic will remain key to both Pound (GBP) and New Zealand Dollar outlooks.
Pound (GBP) Exchange Rates Pull Back after Weeks of Gains
Investors are adjusting positions on the Pound as February draws to an end. After Sterling saw a rocketing rally for most of the month, markets are now taking a pause on this bullish movement to take profit from a month of gains.
Some analysts note the Pound has likely been overbought in recent weeks. Its movement in the second half of this week is likely a correction, at least in part.
Another reason for the Pound’s weakness today could be a rout in global markets that occurred yesterday. As US government bond prices dropped, the yields on these bonds surged.
This led investors to sell shares and risk-correlated assets as they looked for safer investments. As Sterling has been fairly correlated to risk-sentiment lately, it likely weighed on Sterling as well.
New Zealand Dollar (NZD) Exchange Rates Defy Risk-Off Movement on Domestic Outlook
The New Zealand Dollar continues to be one of the most appealing major currencies on markets. As the previously appealing Pound tumbles, the ‘Kiwi’ is capitalising on this and GBP/NZD is plunging.
Investors are optimistic about New Zealand’s outlook as the nation continues to handle the coronavirus pandemic well.
The New Zealand Dollar experienced another jump in demand this week, after it was announced that the Reserve Bank of New Zealand (RBNZ) has gotten a new housing remit. The RBNZ will now focus on supporting sustainable housing prices among its other objectives.
Due to the broad optimism around New Zealand’s domestic outlook, the New Zealand Dollar remained appealing and defied the market’s risk-off movement since yesterday.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Losses May Be Temporary
The Pound to New Zealand Dollar exchange rate is likely to keep tumbling for now. While Britain’s coronavirus recovery outlook is fairly optimistic, the nation’s current economic performance is not hugely impressive. This is weighing on Sterling.
The New Zealand Dollar, on the other hand, will keep rising as investors have little reason to sell the currency.
Current risk-off movement may not last too long as markets are overall optimistic about recovery from the coronavirus pandemic, which is likely to benefit the New Zealand Dollar as well.
Next week’s economic calendars for the UK and New Zealand look a little less eventful, but there are still some key prints on the way.
Britain’s final February PMIs from Markit will provide a more solid idea of how Britain’s economy is weathering lockdown this month. Meanwhile, New Zealand export and import prices and building permits stats are due as well.
Next week will also see the UK Treasury hold its 2021 Budget presentation. The Treasury is expected to keep ramping up spending to protect Britain’s economy, so this could prove influential to the Pound to New Zealand Dollar (GBP/NZD) exchange rate as well.