GBP/NZD Exchange Rate Increases as US-China Trade Tensions Weigh on ‘Kiwi’
The Pound to New Zealand Dollar (GBP/NZD) exchange rate rose by 0.3% today, with the pairing currently fluctuating around NZ$1.96.
The New Zealand Dollar (NZD) continued to struggle today owing to rising fears over US-China trade relations. As a result, NZD investors are feeling increasingly concerned that tensions between the world’s two largest economies could harm New Zealand’s domestic economy.
With China being New Zealand’s largest trading partner, any indications of tensions between Beijing and Washington tends to prove NZD-negative.
Mazen Issa, Senior Currency Strategist at TD Securities, was also downbeat in his forecast for the New Zealand Dollar, saying:
‘We think the NZD’s airtime is starting to look precarious as we move into August, when the RBNZ is poised to increase its [large-scale asset purchases].’
August 12th will see the Reserve Bank of New Zealand (RBNZ) reconvene. As a result, NZD investors are feeling increasingly anxious about the NZ economy as we enter August.
Pound (GBP) Rises as UK Housing Prices Beat Forecasts in July
The Pound (GBP) edged higher today after the UK Nationwide Housing Prices figure for July beat forecasts, rising from -1.6% to 1.7% in July. As a result, GBP investors are becoming increasingly hopeful that the UK economy could be recovering.
Robert Gardner, Nationwide’s chief economist, offered a mixed interpretation of today’s data, saying:
‘However, there is a risk this proves to be something of a false dawn. Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.’
Meanwhile, GBP investors are becoming increasingly cautious as several areas in northern England have faced lockdowns owing to spikes in the coronavirus.
Prime Minister Boris Johnson also postponed the easing of lockdown rules scheduled for 1st August. Consequently, GBP traders are awaiting further announcements on the UK’s domestic coronavirus crisis.
GBP/NZD Forecast: Could a Strong UK Manufacturing PMI Buoy Sterling Next Week?
Pound (GBP) traders will be awaiting Monday’s release of the latest UK Manufacturing PMI for July. If this confirms forecasts and holds at 53.6, then we could see the GBP/NZD exchange rate edge higher on restored confidence in the UK’s manufacturing sector.
New Zealand Dollar (NZD) investors will be looking ahead to Tuesday’s release of the NZ Unemployment Rate figure for the second quarter. Any improvement would prove NZD-positive.
However, NZD will remain sensitive to US-China trade developments. If relations between the world’s two largest economies escalate, then we could see the risk-averse ‘Kiwi’ suffer.
The GBP/NZD exchange rate will also be sensitive to UK-EU post-Brexit trade talks. However, if the relations over a possible trade deal show any signs of improvement, we could see Sterling rise.