GBP/NZD Exchange Rate Rangebound as ‘Kiwi’ Investors Fear RBNZ Could Set Cash Rates to Negative
The Pound to New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$2.06.
The New Zealand Dollar (NZD) has suffered from growing speculation over the Reserve Bank of New Zealand (RBNZ) taking its official cash rate into negative territory to cushion the economic impact of the coronavirus.
Mike Shirly, a dealer at Kiwibank, commented:
‘There was heightened talk about the possibility of the RBNZ shifting the cash rate to negative some time this year. That’s been the key driver today.’
‘It will be interesting to see whether the wider market picks up on that theme and pushes the kiwi lower or whether that’s all of the juice you can squeeze out of that forecast.’
Meanwhile, the ‘Kiwi’ has been held up by growing optimism of New Zealand’s handling of the coronavirus pandemic. This follows NZ Prime Minister Jacinda Arden’s claim that in New Zealand Covid-19 has been ‘currently’ eliminated.
As a result, we could see the New Zealand Dollar begin to edge higher over the next few days as the nation prepares to ease its lockdown restrictions.
Looking ahead, today will see the release of New Zealand’s trade balance report for March. If this suffers significantly because of the coronavirus, then we could see the ‘Kiwi’ begin to fall.
Pound (GBP) Rises Despite UK Retailers Suffering ‘Historic Slide’
The Pound (GBP) held steady against the New Zealand Dollar (NZD) despite UK retailers suffering a ‘historic slide’ due to the nationwide coronavirus lockdown.
Today saw the publication of the Confederation of British Industry’s (CBI) Distributive Trades Survey for April, which plummeted to a worse-than-expected -55%.
The Confederation of British Industry (CBI) commented:
‘Retailers reported a steep drop in sales in the year to April – matching the decline in December 2008, marking the joint sharpest fall since the survey began in July 1983.’
Nevertheless, the Pound (GBP) continues to be buoyed by Prime Minister Boris Johnson’s return to Downing Street after overcoming the coronavirus earlier this month.
Hopes over a UK-EU Brexit deal have also propped up the GBP/NZD exchange rate today, after Cabinet Office Minister Michael Gove said a deal between the two powers was ‘entirely possible’. Mr. Gove also suggested that the coronavirus could even ‘focus minds’ to get a deal done by 31st December.
Gove added:
‘We believe it is still entirely possible to conclude negotiations on the timetable that has been outlined.’
‘Remaining in the transition period would mean we would have to pay the EU money which many of you might think would be better spent on the NHS or supporting our economy.’
GBP/NZD Forecast: Could the ‘Kiwi’ Sink on Negative NZ Business Confidence?
New Zealand Dollar (NZD) investors will be looking ahead to April’s ANZ Business Confidence report for April, which is expected to plummet to -69.5. As a result, we could see the ‘Kiwi’ being increasingly compromised by negative economic data.
The GBP/NZD exchange rate will continue to be driven by both Brexit and coronavirus news over the course of this week. Any signs of an UK-EU compromise ahead of December’s deadline, or lessening cases of Covid-19, would prove Pound-positive.
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