Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Rises as Risk Appetite Falls
UPDATE: The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate was rose by around 0.5% on Friday afternoon, trading at around NZ$2.0202.
The risk-sensitive New Zealand Dollar slumped lower on Friday afternoon after US President Donald Trump told reporters he hadn’t agreed to roll back trade tariffs.
When asked if a tariff rollback will be part of the ‘Phase One’ trade deal, President Trump responded:
‘They’d like to have a roll back but I’ve not agreed to anything.
‘China would like to get somewhat of a roll back, not a complete roll back because they know I won’t do it.’
Commenting on Trump’s remarks, SpreadEx’s Connor Campbell said:
‘The President said he has not agreed to roll back tariffs, as China claimed on Thursday, going on to claim that Beijing wants the deal ‘much more’ than he does. He also stated that the agreement would be signed in the USA, a detail that no doubt won’t go down well with Xi Jinping and co.
‘Though this didn’t spark mass panic, it did ensure that the markets remained in the red as the session went on.’
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises despite ‘Ambiguous’ US-China Tariff Rollbacks
The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate edged higher at the end of the week, trading at around NZ$2.0159.
The risk-sensitive New Zealand Dollar edged lower against the Pound despite reports revealing China and the US had reached a consensus.
Officials from both Washington and Beijing said both countries would roll back tariffs if a ‘Phase One’ trade deal is complete.
White House spokeswoman, Stephanie Grisham told Fox News that the US is ‘very, very optimistic’ about completing a trade deal that would help calm tensions, saying:
‘I cannot get ahead of the talks with China, but we are very, very optimistic that we will reach a deal soon.’
Risk sentiment increased as de-escalating US-China trade tensions removes one of the largest risks to the global economy.
Commenting on this, general manager of fixed income business solutions at SBI Securities Co in Tokyo, Tsutomu Soma said:
‘The overall tone is risk-on, which is a positive for the Dollar and a negative for the Yen.
‘We can see this in other markets, which is why stocks are so strong. We still need to figure out when the United States and China will sign this deal, but the mood so far is supportive for markets.’
However, skepticism inside and outside the White House weighed on the ‘Kiwi’, with President Trump’s outside advisor, Michael Pillsbury revealing the US had ‘been ambiguous when and which tariffs will be lifted’.
Sterling (GBP) Edges Higher despite BoE Divide
On Thursday, in its last monetary policy meeting before the 12th December election, the Bank of England (BoE) left rates on hold at 0.75% as expected, but the Pound was left under pressure yesterday after two officials unexpectedly voted in favour of a rate cut.
Added to this, Governor Mark Carney said the BoE would consider a cut if Brexit uncertainty and global headwinds do not ease. However, this did little to stop Sterling edging up against the ‘Kiwi’ on Friday.
Speaking to reporters, Carney said:
‘These are pretty big tectonic forces operating right now. If global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth.’
For Committee members, Jonathan Haskel and Michael Saunders it is already time to slash rates, as they were the first policymakers to vote for a cut since just after the 2016 Brexit referendum.
Commenting on this, PwC economist, John Hawksworth noted:
‘In the short term at least, it seems the MPC [Monetary Policy Committee] is more concerned about the downside risks to growth and is prepared to pull the trigger on a rate cut if and when these risks materialize.’
Pound New Zealand Outlook: Will GBP Rise as the UK Escapes Recession?
Looking ahead to the start of next week’s session, the New Zealand Dollar (NZD) could rise against the Pound (GBP) following the release of the New Zealand electronic retail card spending.
If October’s retail card spending increases more than expected, it could provide the ‘Kiwi’ with an upswing of support.
Meanwhile, the Pound could regain some losses on Monday following the release of the UK flash GDP growth rate.
If Q3 data reveals the UK has escaped falling into a recession, it could offset any gains from NZD and cause the Pound New Zealand Dollar (GBP/NZD) exchange rate to edge higher on Monday.