Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Slides as ECB Buoys Risk Appetite
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped by around -0.3% this morning. This left the pairing trading at around NZ$1.9448.
The risk-sensitive ‘Kiwi’ was offered a boost after Thursday saw the European Central Bank (ECB) expand its stimulus more than expected.
The Euro (EUR) continued to make gains on Friday and this supported riskier assets such as NZD, and helped to push the US Dollar (USD) towards three-month lows.
The ECB increased its coronavirus emergency bond buying scheme by €600 billion to €1.35 trillion and extended the scheme to mid-2021. This boosted risk sentiment as markets only expected a €500 million increase.
Risk appetite also improved after data showed the number of Americans filing for unemployment benefits fell below two million for the first time since mid-March. Although, this was still three times larger than the peak during the global financial crisis.
However, relations between the United States and China continued to deteriorate. This week, Washington and Beijing clashed over Hong Kong’s trade status, airlines operation and human rights issues.
British Confidence Tumbles to Decade-Low
Meanwhile, Sterling edged lower after British consumer confidence slumped to its lowest level since the global financial crisis in May.
GfK’s survey showed consumers worried about a rise in unemployment and plummeting house prices caused by the coronavirus crisis.
Consumer sentiment plummeted to -36 in the second half of May, deteriorating further from -34 in the first two weeks. This was also not far from an all-time low of -39 hit in July 2008.
Commenting on this, client strategy director at GfK, Joe Staton noted:
‘With no sign of a rapid V-shaped bounce-back on the cards, consumers remain pessimistic about the state of their finances and the wider economic picture for the year to come.
‘As the lockdown eases, it will be interesting to see just how the consumer appetite for spending returns in a world of socially-distanced shopping and the seismic shift to online retailing.’
Pound New Zealand Dollar Outlook: Risk Appetite and Brexit Negotiations in Focus
Looking ahead to this afternoon, the New Zealand Dollar (NZD) could suffer losses against the Pound (GBP) if risk appetite plummets.
If May’s US nonfarm payrolls plunge further and the country’s unemployment rate jumps to an all-time high, it could spook traders. This could spark an upswing of support for the safe-haven US Dollar (USD).
Meanwhile, ongoing post-Brexit trade negotiations between the UK and European Union are likely to remain in focus for investors. The latest round of talks is set to enter the final day of negotiations on Friday.
While reports have suggested both sides have reached yet another impasse, good news could buoy Sterling.
If traders remain optimistic that Britain will be willing to compromise on key issues such as fisheries with the EU, the Pound New Zealand Dollar (GBP/NZD) exchange rate will edge higher.
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