The Pound New Zealand Dollar (GBP NZD) exchange rate surged by around two cents to a new seven-month high this morning as tensions in the Asia-Pacific region continue worrying investors.
Amid lower trading volumes as New Zealand markets close for Anzac Day, the ‘Kiwi’ plummeted this morning following the surprise move by US President Donald Trump to recall the entire US senate for a briefing on North Korea.
The briefing, to be held on Wednesday, comes as tensions on the Korean peninsula appear to be reaching boiling point, with Pyongyang making threats to perform missile tests and continue its nuclear programme.
Speaking to Reuters, congressional aides suggested that Trump wishes to show that he is serious about shifting US policy on North Korea and while the President favours a diplomatic solution, a number of Republicans remain supportive of direct military action, with Republican Senator Lindsey Graham suggesting;
‘By 2020, if nothing changes inside of North Korea, they’ll have the technology, they’ll have a breakthrough, to develop an ICBM that can reach America. I hope this president will say that’s a non-starter.’
While Trump has said he will work closely with Xi Jinping, his counterpart in China, any suggestion of action against Beijing’s belligerent ally without China’s consent could lead to a breakdown in US-Chinese relations, possibly having a major knockback effect on global trade – which New Zealand relies upon.
Meanwhile the Pound’s gains were slowed this morning by the release of the UK’s latest Public Sector Borrowing figures.
While the ONS reported that the UK’s deficit for the 2016/17 financial year fell to £52bn, its lowest level in nearly ten years and close to the government’s target of £51.7bn, the outlook for next year was more downbeat as economists forecast the government will need to borrow £58bn to balance the books.
Looking ahead the GBP NZD exchange rate may lose ground on Thursday if UK Housing Prices continue to decline in April, following a sudden contraction to -0.3% last month.
Meanwhile the New Zealand Dollar may bounce back later that evening if the latest domestic trade balance leaps to $370m as analysts predict.
Current Interbank Exchange Rates
At the time of writing the GBP NZD exchange rate was trending around 1.78 and the NZD GBP exchange rate was trending around 0.56.
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