GBP/NZD Exchange Rate Rangebound as Market Risk Appetite Returns for ‘Kiwi’
The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$2.028 as market risk-appetite for the ‘Kiwi’ improves as fears over China’s coronavirus epidemic lull.
Russ Mould, an Investment Director at AJ Bell, commented:
‘It feels like markets are looking for any excuse to feel positive at the moment. Apple’s coronavirus-linked iPhone sales warning earlier this week may have spooked investors briefly. However, markets have soon shifted their attention elsewhere.’
With China being New Zealand’s largest trading partner, concerns are however continuing to grow over the epidemic’s impact on China’s economic growth in the first quarter.
The trade-correlated New Zealand Dollar (NZD), therefore, will likely suffer from China’s economic slowdown, as this would also have a negative knock-on effect on the New Zealand economy.
GBP/NZD Exchange Rate Holds Steady In Spite of Strong UK Inflation in January
The Pound (GBP) failed to gain on the ‘Kiwi’ today in spite of a stronger-than-expected UK inflation report for January, which rose to a 6-month high of 1.8%.
Mike Hardie, Head of Inflation at the Office for National Statistics (ONS), commented:
‘The rise in inflation is largely the result of higher prices at the pump and airfares falling by less than a year ago. In addition, gas and electricity prices were unchanged this month, but fell this time last year due to the introduction of the energy price cap.’
Due to rising inflation, the odds of an interest rate cut from the Bank of England (BoE) have now lowered, with the inflation figure now within the projections of the bank’s Monetary Policy Committee (MPC).
Rut Gregory, a Senior UK Economist at Capital Economics, said that the bank was also ‘unlikely to move the dial on the outlook for interest rates’.
Post-Brexit developments continue to hinder the GBP/NZD exchange rate’s gains today, however, after David Frost, the UK’S Chief Brexit Negotiator commented that the UK would not be looking to comply with EU rules in upcoming trade talks.
GBP/NZD Outlook: Sterling Could Rise on Improving UK Retail Sales in January
The Pound (GBP) could begin to rise against the New Zealand Dollar (NZD) tomorrow if the UK Retail Sales report for January confirms consensus and rises from -0.8% to 0.8%, as this would provide further evidence that the UK economy is improving post-Brexit.
The New Zealand Dollar (NZD), meanwhile, will continue to be driven by market risk-appetite. Any further escalation of China’s coronavirus epidemic, therefore, could prove NZD-negative.