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GBP/NZD Exchange Rate Dips Despite Hawkish Bias from the Reserve Bank of New Zealand

Published: 27 May at 10 AM Tags: Pound Sterling, Dollar Exchange Rate, Australian Dollar Exchange Rate, New Zealand Dollar Exchange Rate, Currency Exchange, Forex, Rupee Exchange Rate, UK, Exchange Rates, Economy,

The Pound New Zealand Dollar (GBP/NZD) exchange rate fell by -0.2% despite the Reserve Bank of New Zealand’s (RBNZ) hawkish bias this week by forecasting a possible rate hike next year. The pairing is currently trading around NZ$1.93.

The New Zealand Dollar’s gains against the Pound – which shot up by 1% yesterday – proved to be short-lived as New Zealand-China trade relations continue to show signs of souring.

New Zealand’s foreign minister Nanaia Mahuta warned about growing tensions between New Zealand and Beijing, saying:

‘We cannot ignore, obviously, what’s happening in Australia with their relationship with China. And if they are close to an eye of the storm or in the eye of the storm, we’ve got to legitimately ask ourselves – it may only be a matter of time before the storm gets closer to us.’

As a result, demand for the risk-sensitive ‘Kiwi’ has fallen as a fall-out between New Zealand and China – the world’s second-largest economy – would severely limit the nation’s economic recovery.

Despite this, China has recently urged New Zealand to work together and ‘rise above distractions’.

As New Zealand is highly dependent on trade with China, this has provided some hope that relations between the two nations could improve in the coming months.

The Pound (GBP) rose today despite concerns over a modest rise of Covid-19 infection rates throughout the UK in the past few weeks.

Vaccines have been deemed effective against the new coronavirus variant found in India but Pound traders are remaining cautious.

Rising numbers of the virus could, however, delay the further easing of lockdown measures next month.

Meanwhile, business leaders have warned Prime Minister Boris Johnson that further fiscal support was necessary despite predictions of a short-term economic boom in the summer.

Kate Nicholls, the chief executive of UK Hospitality, said that despite progress being made in the economy and for the hospitality sector it was still ‘far from a champagne moment for the industry’ because of lockdown restrictions.

However, GBP investors are becoming more optimistic about June, which will see lockdown restrictions further eased.

Hopes continue to grow that Boris Johnson sticking to his pledge of the latest easing of these measures would be ‘irreversible’.

Looking ahead, New Zealand Dollar traders will be eyeing Friday’s release of the latest New Zealand ANZ Roy Morgan consumer confidence report for May.

If the outlook for the New Zealand economy continues to improve, then the NZD/GBP exchange rate would head higher.

The Pound New Zealand Dollar could become subdued by the end of the week, however, if concerns over rising Covid-19 rates in the UK eclipses confidence in the further easing of lockdown measures next month.
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