Pound Maintains Upper Hand over New Zealand Dollar on Continuing Global Trade Fears
The Pound (GBP) is trading up against the New Zealand Dollar (NZD) today, showing around a 0.2% rise on the day.
The New Zealand Dollar is struggling to make any headway against the Pound and other peers today due to continued concerns about the US-Chinese trade spat.
Even if the trade conflict is currently limited to the US and China, FX traders are concerned that any further deterioration will negatively impact global trade and therefore New Zealand’s export-led economy.
Although there has been a notable lull in the rhetoric over recent days, Washington’s latest round of tariffs came into effect yesterday.
GBP/NZD Exchange Rate Recovers Ground after Friday’s Breakdown in Brexit Negotiations
Last Friday saw the Pound (GBP) suffer heavy losses as EU leaders unanimously rejected UK Prime Minister Theresa May’s plans for a post-Brexit trade deal after the UK leaves the EU next March.
Following this the Pound slumped – falling substantially against the New Zealand Dollar – and causing Theresa May to conduct a hastily organised televised address in which she called for the EU to ‘respect’ the UK and said ‘no deal is better than a bad deal,’ whilst also trying to reassure people that she was not ready to give up finding a solution to the impasse.
Her words sparked concerns among Pound traders that she was saying there would be no deal with the EU, adding to the Pound selloff.
On Monday, however, the Pound regained most of its losses when Brexit Secretary Dominic Raab stated that the UK was still committed to seeking a deal with the EU and that such a deal was, in fact, not far off.
GBP/NZD Exchange Rate Outlook: Could GBP Appreciate against NZD if NZ Trade Figures Disappoint?
For the rest of this week, GBP/NZD is likely to be driven at least in part by today’s New Zealand trade balance reading and the Reserve Bank of New Zealand’s (RBNZ) interest rate decision which takes place on Wednesday.
Currently, the trading position is expected to deteriorate, and there is not expected to be any change in the interest rates, so either of these has the potential to drive the Pound higher against the New Zealand Dollar.
Federal Reserve’s Interest Rate Hike Could Push GBP/NZD Higher
Tomorrow will also see the US Federal Reserve interest rate decision taking place. The current expectation is for a rate hike from 2% to 2.25%.
Given that a rate hike will see greater demand for US Dollars, this usually has the effect of reducing demand elsewhere – especially against trade correlated currencies, such as NZD. If this were to happen, we can expect the knock-on effect to be a rise in GBP/NZD.
Back in the UK, the next data of note to be published takes the form of consumer confidence and GDP stats on Friday.
Current expectations are for a faster pace of GDP growth, although consumer sentiment is expected to worsen. If the latter surprises to the upside, however, we should see an additional GBP/NZD exchange rate rise.
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