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Pound to New Zealand Dollar Exchange Rate Forecast: Further Trade Jitters Means Further Gains for GBP/NZD

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Pound to New Zealand Dollar Exchange Rate Climbs on Latest Trump Tariffs

After a volatile start to the week, demand for the Pound (GBP) began to sturdy again on Tuesday. On Wednesday morning, the Pound to New Zealand Dollar (GBP/NZD) exchange rate advanced in reaction to the latest escalation in the US-China trade war.

Since opening this week at the level of 1.9436, GBP/NZD briefly advanced before being knocked to a low of1.9323 by high-profile resignations in the UK government. It was the pair’s lowest level in a fortnight.

However, UK political jitters softened on Tuesday and the latest US trade tariff news was enough to help GBP/NZD climb above the week’s opening levels again. GBP/NZD currently trends near the level of 1.9465.

Demand for the Pound (GBP) has risen as investor jitters about the UK government have eased somewhat. Meanwhile, the latest US trade tariffs announced for China spooked markets and left the risky New Zealand Dollar (NZD) unappealing.

Pound (GBP) Exchange Rates More Appealing as Political Jitters Fade

Following Monday’s shocking resignations of the UK Brexit and Foreign Secretaries, their replacements were promptly announced and Tuesday didn’t see any further surprising developments.

As a result, by Wednesday the week’s shocking political developments had largely faded already and investors were a little more confident in the Pound again.

Sterling demand was supported by other factors on Tuesday, making it easier to recover its losses against the New Zealand Dollar too.

Tuesday’s UK Gross Domestic Product (GDP) report from May showed growth improving from 0.2% to 0.3% month-on-month, with the three-month-average figure for May coming in at 0.2%.

Optimistic comments from EU Chief Negotiator Michel Barnier, saying that up to 80% of a full UK-EU Brexit deal had been reached, also supported Sterling.

However, the Pound’s strength was limited as Brexit jitters persisted.  The UK growth report made analysts concerned about Britain’s imbalanced economic growth relying so heavily on the services sector.

New Zealand Dollar (NZD) Exchange Rates Sold as Trade Jitters Return

Risky trade-correlated currencies like the New Zealand Dollar had seen stronger demand since the end of last week, due to a brief risk-on movement in markets.

Investors sold safe haven currencies like the US Dollar (USD) from recent highs and bought cheaper risky currencies from their lows.

The risk-on rally was short-lived though, as Tuesday night saw US President Donald Trump announce a new round of trade tariffs on China.

News of an escalation in the US-China trade war rattled markets, as Trump confirmed that additional 10% tariffs would be put on a further $200b of imports from China.

China quickly criticised the move and it was indicated that further escalations were likely from the nation.

As a result, investors found riskier currencies a lot less appealing and some of the New Zealand Dollar’s recent strength faded.

Pound to New Zealand Dollar (GBP/NZD) Forecast: Trade Developments and BoE Bets in Focus

Amid a lack of notable UK data due for publication in the coming days, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is more likely to be driven by trade war developments.

Any UK news that could influence Bank of England (BoE) interest rate hike bets is likely to influence the Pound, as well as any Brexit developments, but Wednesday’s speech from BoE Governor Mark Carney might not have much to do with UK monetary policy.

As a result, if there are no developments that could impact Sterling GBP/NZD will be driven more by the New Zealand Dollar instead.

Thursday will see the publication of New Zealand’s June food inflation report, followed by June’s NZ business PMI on Friday.

However, the biggest influence for NZD movement will be trade developments. If the US-China trade war continues to escalate, there may not be much chance of the Pound to New Zealand Dollar (GBP/NZD) exchange rate seeing a sustained fall.