Souring US-China Relations Offer Pound New Zealand Dollar (GBP/NZD) Exchange Rate Boost
An abrupt deterioration in relations between the US and China helped the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate to return to a positive footing.
Markets were naturally spooked as the Trump administration floated the possibility of fresh trade sanctions against China, fuelling a fresh wave of risk aversion.
With the global economy already under significant pressure thanks to the Covid-19 pandemic the risk of another trade spat weighed heavily on investor sentiment and the New Zealand Dollar (NZD).
While hopes of a further easing in global lockdown conditions remain this was not enough to prevent NZD exchange rates stumbling on Thursday.
New Zealand Dollar Weakness Forecast on NZ PMI Contractions
The mood towards the New Zealand Dollar could sour even further on the back of March’s New Zealand manufacturing and services PMIs.
With both indexes forecast to fall into a state of contraction, reflecting the impact of lockdown conditions, NZD exchange rates look set to come under additional pressure.
Although the New Zealand economy is already taking steps to return to normal any signs of a first quarter slowdown could still weigh on the New Zealand Dollar.
Unless the manufacturing or service sectors can demonstrate greater resilience in the face of the pandemic disruption, though, the GBP/NZD exchange rate could find a rallying point.
As long as the general sense of market risk appetite remains muted this may also keep the New Zealand Dollar under pressure against its rival.
However, NZD exchange rates may find support ahead of the weekend if April’s Chinese industrial production data shows positive growth on the year.
Evidence that the world’s largest economy is recovering from the impact of its own Covid-19 lockdown could encourage a renewed sense of market risk appetite in the near term.
GBP/NZD Exchange Rate Vulnerable to Underwhelming UK Labour Market Data
Comments from Bank of England (BoE) Governor Andrew Bailey put pressure on Pound Sterling (GBP), meanwhile.
With Bailey not completely ruling out the possibility of negative interest rates a sense of dovishness weighed on GBP exchange rates.
Further weakness could be in store for the Pound next week if the latest set of UK labour market data shows signs of softness.
Any uptick in March’s unemployment rate could dent the GBP/NZD exchange rate, even though the bulk of the impact of the lockdown looks set to materialise in April’s data.
Weaker wage growth figures may also put pressure on the Pound, with lower growth in average earnings likely to translate into a further reduction in consumer spending in the months ahead.
Without reason to bet on the UK economy recovering its lost momentum sooner rather than later the GBP/NZD exchange rate may struggle to make any particular headway.