GBP/NZD Exchange Rate Falls Despite Vaccine Concerns Weighing on Risk Sentiment
The Pound to New Zealand Dollar (GBP/NZD) exchange rate dipped today despite growing caution over Covid-19 vaccine rollouts weighing on risk sentiment. The pairing is currently fluctuating around NZ$1.92.
The New Zealand Dollar (NZD) rose today despite risk-off trade after several countries within the European Union (EU) have suspended the UK’s Covid-19 AstraZeneca following blood clot reports.
Consequently, this has dampened demand for the risk-sensitive ‘Kiwi’, as questions about the global vaccine rollout spark concerns over the global economy’s recovery in the next few months.
However, Asian markets have risen on optimism over the US Stimulus package ahead of the US Federal Reserve meeting.
Stephen Innes, chief global markets strategist at Axi, explains:
‘The $1.9 [trillion] stimulus package in the U.S. will lead to a stronger U.S. and global recovery, hence more exports for China, which continues to resonate through Asia risk sentiment as the global synchronized growth story looks more in sync than only one week ago.’
As a result, the New Zealand Dollar has benefited from growing confidence in Asian markets.
With China being New Zealand’s largest trading partner, this bodes well for the nation’s economy in the next few months.
Pound (GBP) Struggles as UK-EU Tensions Intensify Over Vaccines and Northern Ireland
The Pound (GBP) struggled today owing to rising tensions between the UK and the EU over Northern Ireland’s border issues, which has caused legal action from both sides, and several nations within European Union suspending the UK AstraZeneca vaccine.
Consequent, GBP investors are becoming more cautious due to concerns that escalating tensions between the UK and the EU could result in an economic feud and limit economic recovery in the months ahead.
Marios Hadjikyriacos an analyst at XM explains:
‘Sterling is on the retreat after the EU launched legal action against the UK over its decision to delay post-Brexit checks on goods going to Northern Ireland. Brexit risks have flown under the radar lately but could return to haunt the pound considering that the details governing financial services haven’t been settled yet.
‘That said, it’s doubtful whether that would be enough to offset the reigning vaccine enthusiasm.’
UK Prime Minister Boris Johnson also failed to rule out the treat of future pandemics, saying there was a ‘realistic possibility’ beyond the coronavirus pandemic.
GBP/NZD Exchange Rate Forecast: Could Strong NZ GDP Boost the ‘Kiwi’?
New Zealand Dollar (NZD) traders are looking ahead to tomorrow’s release of the New Zealand Gross Domestic Product figure for the fourth quarter of 2020.
Any improvement in the outlook for New Zealand’s economy could further drive up the NZD/GBP exchange rate.
Risk sentiment will also influence the risk-sensitive ‘Kiwi’ this week. Any further uncertainty over Covid-19 vaccines would be NZD-negative.
Pound traders are looking ahead to Thursday when the Bank of England (BoE) is due to announce its latest interest rate decision.
Any more bullishness from the BoE, however, would drive up the GBP/NZD exchange rate.
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