GBP/NZD Exchange Rate Rangebound as Risk-Off Market Mood Weighs on Risk-Averse Kiwi
The Pound to New Zealand Dollar (GBP/NZD) exchange rate held steady this morning, with the pairing currently trading around NZ$1.920.
The New Zealand Dollar (NZD) struggled to gain on Sterling today after protests have broken out in Hong Kong, after controversial security laws were imposed by Beijing.
As a result, this has sparked fears that US-China trade tensions could be under strain, after Washington has openly criticised China’s imposition on Hong Kong.
US secretary of state Mike Pompeo commented:
‘[The US would] not stand idly by while China swallows Hong Kong into its authoritarian maw.’
Added to this, ‘Kiwi’ investors are becoming increasingly concerned by signs that Covid-19 cases are increasing worldwide. With fears of a possible second wave continuing to haunt global markets, appetite for the risk-averse New Zealand Dollar has dwindled.
However, following reports this week that New Zealand’s economy could emerge better than most from the coronavirus pandemic, confidence in the NZD remains.
S&P Asia-Pacific chief economist Shaun Roache comments:
‘New Zealand definitely is one of those economies that has exited the most severe periods of the pandemic first, and that clearly was just because what that allows the economy to do is reopen those face-to-face service activities that are so important for the labour market, and that hopefully should get jobs restarted people can go back to work.’
Pound (GBP) Steady Despite Falling UK House Prices in June
The Pound (GBP) is rangebound with NZD today despite UK house prices falling from June to -1.4% from last month’s -1.7%. As a result, Sterling traders are becoming increasingly jittery over Britain’s struggling economy.
Jonathan Hopper, CEO of Garrington Property Finders, commented on today’s data:
‘So far this is a hard reset for the market rather than a collapse. The gains of the ‘Boris bounce’ seen at the start of the year have been swept away, and the market is transitioning to the ‘new normal’.’
‘With estate agents across the UK at last able to conduct viewings, both buyers and sellers are feeling their way on price.’
Today also saw reports that UK factories are continuing to cut jobs, with the manufacturing sector being particularly hit by the coronavirus crisis. Consequently, this has further dimmed prospects for the UK’s economic recovery in the months ahead.
IHS Markit commented on the report:
‘Although the rate of decline eased further from April’s record it remained among the steepest registered in the 28-year survey history. There were reports of redundancies, cost control efforts, workforce restructuring and the non-replacement of leavers.’
GBP/NZD Outlook: Could Escalating US-China Trade Tensions Drag Down ‘Kiwi’?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK GfK Consumer Confidence gauge for June. Any improvement in consumer morale would prove GBP-positive.
Meanwhile, Brexit will remain in focus this week, with investors paying close attention to US-EU trade negotiations. If these show little signs of progress, then we could see the GBP/NZD exchange rate begin to fall.
The New Zealand Dollar (NZD) will be dictated by risk-sentiment this week. As a result, we could see the ‘Kiwi’ sink if US-China trade tensions begin to escalate.