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Pound to New Zealand Dollar Exchange Rate Rebounds as Election Hopes and Trade Fears Dominate Outlook

Pound to New Zealand Dollar Exchange Rate Recovers Following Bearish Start to Week

Following some surprising resilience in the New Zealand Dollar (NZD) earlier this week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is recovering from lows today. This is due largely to UK election hopes boosting Sterling (GBP).

Last week’s rise in bets of a Conservative Party majority boosted GBP/NZD just over a cent, from 2.0030 to 2.0132 throughout the week.

This week so far though, GBP/NZD has been trending with a downside bias, seeing notable losses at the beginning of the week and touching on a month and a half low of 1.9867 on Monday.

GBP/NZD has been edging higher in recovery since then though, and this morning the pair rebounded. At the time of writing, GBP/NZD is trending near the level of 2.0034, just above last week’s opening levels.

Pound (GBP) Exchange Rates Supported by UK Election Hopes and Decent Data

Earlier this week, the Pound outlook was more mixed as UK election polling indicated that the opposition Labour Party was narrowing the gap on the ruling Conservatives.

While the Pound’s movement steadied yesterday following the publication of polls showing that the Conservative lead was still solid, the Pound became even more appealing today.

A fresh YouGov poll published on Tuesday night gave the Conservatives a 9-point lead over Labour.

According to Marc-Andre Fongern, EMEA Foreign Exchange Analyst at MAF Global Forex:

‘The Labour party is running out of time to significantly narrow the gap with the Tories. Against this backdrop, the Pound Sterling is attracting investors’ attention.’

On top of election hopes, the Pound found a little additional support today as Britain’s key services PMI beat projections. The services PMI came in at 49.3 rather than the expected 48.6.

As services make up a big chunk of Britain’s economic activity, news that the services sector had contracted less than expected last month was a slight relief to investors. Overall though, the contraction was still a concerning sign for Britain’s economic outlook.

New Zealand Dollar (NZD) Exchange Rates Hit by Trade War Fears

Earlier this week, the New Zealand Dollar benefitted from a combination of domestic hopes for New Zealand economic resilience, as well as weakness in the US Dollar (USD). This pushed GBP/NZD to notable lows.

Recent New Zealand and Chinese data has been decent, dousing fears about how the US-China trade war is impacting New Zealand’s economy. The US Dollar (USD) selloff in reaction to weak US data also left the New Zealand Dollar more appealing in comparison.

However, yesterday’s headlines were dominated by fresh comments from US President Donald Trump, indicating that the US-China trade war could continue for some time to come.

Trump hinted it may be better to leave a trade deal until after the 2020 US Presidential Election. This caused hopes of an imminent ‘phase one’ trade deal to fade, and fears that the trade war could escalate returned.

As the New Zealand Dollar is a trade-correlated currency it has been weakened by the news today. According to Jim Reid from Deutsche Bank:

‘After the stepping up of negative global tariff rhetoric over the last 48 hours, yesterday’s headlines suggesting that the US is going forward with the December 15 tariffs grabbed the limelight, although markets had already been trading weaker prior to that.’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Outlook Awaits Further Political and Trade News

Amid a lack of notable UK or New Zealand data due for publication until next week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate’s movement will continue to focus on factors relating to politics and trade.

With just over a week until Britain’s 12th of December election, the Pound is likely to be increasingly volatile.

Sterling could see sharp movements if there are any surprise shifts in polling over the coming days. Better polling for the opposition Labour Party would worsen the perceived chances of a hung Parliament and further Brexit deadlock, which would weaken the Pound.

The trade-correlated New Zealand Dollar, on the other hand, could be in for further losses if US-China trade tensions escalate further.

Overall, volatility is expected in the Pound to New Zealand Dollar (GBP/NZD) exchange rate as politics and trade influence the outlook.

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