GPB/NZD Exchange Rate Sinks Despite Rising Fears Over US-China Trade Tensions
The Pound to New Zealand Dollar (GBP/NZD) exchange rate dipped by -0.1% today, with the pairing currently trading around NZ$1.95.
The New Zealand Dollar (NZD) has continued to benefit from market hopes of a potential global economic recovery. However, tensions between the US and China have held back the ‘Kiwi’ today with risk sentiment rather more muted than it was yesterday.
Tensions between the two superpowers flared up after the US Trump Administration barred passenger flights from China to the US from the 16th June. As a result, this has sparked off concerns that tensions between the two economic giants are set to flare-up in the near-term.
Daniel Kliman, director of the Asia-Pacific Security Program at the Centre for a New American Security, commented:
‘We’re already seeing de-coupling of the United States and China. It’s an acceleration of a trend that has really been building up.’
As a result, ‘Kiwi’ traders have become increasingly jittery, with China being New Zealand’s largest trading partner. Any further signs of an escalation between Beijing and Washington would therefore prove NZD-negative.
Pound (GBP) Sinks as UK Construction PMI Falls Below Consensus
The Pound (GBP) struggled today following the release of the UK construction PMI for May, which fell below forecasts at 28.9. Despite this beating April’s nadir of 8.2, this was not enough to inspire market confidence in Britain’s economic recovery from the coronavirus pandemic.
Tim Moore, Economics Director at IHS Markit, commented:
‘It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect. However, latest PMI data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors.’
Meanwhile, today also saw UK car sales fall by 90% in May, leaving many investors concerned for the UK’s economic recovery in the short-term.
Independent car manufacturer, Aston Martin, also announced that it will lay off 500 employees owing to ‘lower than originally planned production volumes’.
Later today will also see the release of the UK’s GfK consumer confidence survey for May. However, with the figure set to fall, we could see the GBP/NZD exchange headed downward.
GBP/NZD Outlook: UK-EU post-Brexit Talks in Focus
The New Zealand Dollar (NZD) will continue to be driven by risk sentiment this week. However, with concerns growing over US-China trade relations, we could see the ‘Kiwi’ begin to suffer.
Meanwhile, Sterling traders will be awaiting tomorrow’s publication of the Halifax house prices figures for May. Any slump in house prices would exacerbate concern over the UK’s economic recovery going forward.
The GBP/NZD exchange rate could sink deeper if UK-EU post-Brexit negotiations continue to point to a no-deal later this year. However, if Downing Street drops any hints of an extension to the transition period, then we could see Sterling soar.