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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Plummets as ‘Phase One’ Deal Agreed

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls as US Tariffs Cancelled

UPDATE: The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped on Friday afternoon as risk appetite rose. The pairing is currently trading at around NZ$2.0244.

US President Donald Trump and officials from Beijing announced that they had agreed to a ‘phase one’ trade deal.

The president tweeted:

‘We have agreed to a very large Phase One Deal with China.’

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Slips as Tories Secure Majority

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped on Friday morning as election results revealed the Conservatives had secured a majority. However, GBP fell back leaving the pairing trading at around NZ$2.0236.

Sterling rallied overnight following the UK election exit polls which predicted the Conservatives would secure a majority.

This saw the pairing eye the largest single-day gain in over three years, and jump to the highest level since October 2018.

Commenting on GBP movement after the exit poll, CMC Markets’ chief market strategist, Michael McCarthy stated:

‘We’ve already seen a strong reaction in the Pound from the exit poll.

‘We also see a rise in stock futures in reaction to two very important pieces of news for markets. This should support global growth.’

Markets were optimistic that a Tory majority would mean the black cloud that has been Brexit uncertainty would clear.

The Prime Minister has gained enough seats to secure the party a clear majority, with just one result left to come in. This could see the Conservatives gain the largest victory since the 1980s.

However, the Pound slumped as it is likely the uncertainty is far from over with a trade deal deadline of December 2020.

Commenting on this, in a note to clients, MUFG analysts wrote:

‘There is a risk of some disappointment if businesses continue to hold back on spending until they have more clarity on the future trading relationship.’

New Zealand Dollar (NZD) Rallies as US-China Trade Deal ‘Close’

The New Zealand Dollar rose on Friday after global risk appetite received a boost as uncertainty from the UK election and US-China tariffs due at the weekend cleared.

Tensions between the US and China appeared to deescalate after sources from Washington said the country had set out its terms for a trade deal.

Added to this, the US side had offered to suspend some tariffs due to kick in on Sunday.

On Thursday, US President Trump tweeted that the US and China were ‘very’ close to a deal which buoyed the risk-sensitive ‘Kiwi’.

However, risk appetite will not receive a complete boost until the 15th December deadline has passed.

Commenting on this, FX strategist at Commerzbank, Thu Lan Nguyen noted:

‘Only if it’s actually signed and it’s really official then the market will fully price it in.’

Pound New Zealand Dollar Outlook: Will Trade Optimism Buoy NZD?

Looking ahead, the New Zealand Dollar (NZD) could rally on Monday against the Pound (GBP) if risk appetite jumps.

If the US do not hit China with tariffs on the 15th December, it will boost the risk-sensitive ‘Kiwi’.

Meanwhile, Sterling could be left under pressure on Monday after the flash UK services data.

If December’s preliminary data shows the services sector slumped further into contraction than expected, the Pound New Zealand Dollar (GBP/NZD) exchange rate will fall.