Upswing in Risk Appetite Causes the Pound New Zealand Dollar (GBP/NZD) Exchange Rate to Slide
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped and the pairing is currently trading around NZ$1.9151.
As tensions between the US and China showed further signs of cooling, an upswing in risk appetite buoyed the New Zealand Dollar.
Wednesday’s announcement that Beijing would exempt a basket of US goods from further tariff hikes for a year suggested tensions were cooling.
In response to this, US President Donald Trump announced a planned tariff hike in October would be delayed by two weeks.
While these gestures may ease tensions ahead of next month’s in-person talks, investors do not believe this is a solid sign an agreement is within sight.
Commenting on this, Jeffrey Halley, senior market analyst for Asia Pacific OANDA said:
‘The nascent thaw in US and China trade relations appears to be gathering momentum.
‘Just as the presidential tweet on tariffs this morning has injected more momentum […] we are only one social media post away from a thoroughly unpredictable President turning sentiment on its head.’
New Zealand Dollar (NZD) Rallied as Food Inflation Hits 15 Month High
Food prices in New Zealand saw the largest annual rise in 15 months as food inflation jumped by 2.1%.
Buoyed by fast increases to meat prices, which jumped 8% in a year buoyed overall food inflation and provided the ‘Kiwi’ with an upswing of support.
Data revealed that the price of bacon rose 11% to a new record high, and commenting on this, consumer prices manager Sarah Johnson said:
‘We import a lot of our bacon, so prices are very dependent on the global market.
‘There is currently a shortage of pork, following the outbreak of African swine fever, and this is impacting our prices.’
Meanwhile, further data revealed that household power bills in New Zealand hit a 10 year low.
‘Severe Risks’ of No-Deal Cause Pound (GBP) to Slide
As there is a lack of notable economic data releases for the UK, Brexit tensions remain the main catalyst for movement of Sterling.
After the government published its no-deal Brexit assessment, Shadow Brexit Secretary Sir Keir Starmer stated it confirmed there are ‘severe risks’ to a no-deal.
Added to this, Labour have said it is ‘more important than ever’ for parliament to be recalled after it was suspended on Tuesday.
Starmer claimed recalling parliament would allow MPs ‘the opportunity to scrutinise these documents and take all steps necessary to stop no-deal’.
These comments followed a decision to overturn an earlier ruling from Scotland’s highest civil court, with judges now ruling Boris Johnson’s suspension of parliament is unlawful.
Pound New Zealand Dollar Outlook: Will Risk Appetite Continue to Buoy NZD?
Looking ahead to this evening, the New Zealand Dollar (NZD) could be left muted against the Pound (GBP) following the release of August’s Business NZ PMI.
The ‘Kiwi’ could be left under pressure if the PMI continues to slide further into contraction.
Meanwhile, investors are likely to be monitoring US-China trade tensions carefully.
If this week’s goodwill gestures from the US and China continue to buoy risk-appetite, it could offset disappointing PMI data leaving the ‘Kiwi’ muted against Sterling.