Pound New Zealand Dollar Exchange Rate Steady, ‘Kiwi’ ‘Marooned’ as Markets Eye US-China Trade Developments

November 27, 2019 – Written by John Cameron

GBP/NZD Exchange Rate Rangebound, US-China Trade Deal ‘Imminent’

The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$ 2.004 with a US-China trade deal being reported as ‘imminent’ ahead of Beijing’s upcoming policy meeting.

The risk-sensitive New Zealand Dollar (NZD), however, failed to gain on the stronger Pound today, with Martin Rudings, an adviser at OMF, saying that the currency remains ‘marooned’ as markets await further developments between the US and China.

Jinny Yan, Chief China Economist at ICBC Standard Bank, said:

‘The key priority for [Chinese President] Xi Jinping and policymakers across China is stability, so anything that overthrows stability is going to be essentially a concern. That includes Hong Kong, the U.S.-China situation, and that is why a phase one deal is absolutely crucial.’

Yesterday’s release of New Zealand’s trade figures also showed that the NZ economy had not suffered as much as expected from global trade tensions.

Francesco Pesole, a Currency Strategist at ING, commented:

‘A pick-up in exports – fuelled by a rebound in Chinese demand – helped the trade deficit to shrink more than expected in September. October data today should point to a further improved trade balance, once again driven by rising exports, which should continue to signal that NZ trade has not suffered major headwinds from trade tensions.’

GBP/NZD Exchange Rate Steady, UK Political Developments in Focus

The Pound (GBP) remained relatively unmoved against the ‘Kiwi’ today as British opinion polls tighten, with the Conservatives’ lead over Labour falling from 18 points to 11, while Labour has gained an impressive 5 points in just over a week.

A Conservative majority is generally favoured by markets, with expectations that the Tories will effectively resolve Brexit uncertainty by the end of January, so any signs of slipping favourability in the polls tend to be Pound-negative.

Adam Cole, a Currency Strategist at RBC Capital Markets, commented:

‘It is hard to disagree that a Conservative majority is the most likely outcome of the election, but with markets priced for this with a high degree of confidence, the hurdle is low for GBP slipping back to the bottom of its recent range.’

Meanwhile, last night was the final chance to register to vote, and with a last-minute surge in below 35-year old voters – which are statistically more likely to vote for Labour – this could prove a boost for Labour ahead of tonight’s influential YouGov MRP poll.

GBP/NZD Outlook: Could Sterling Fall on Rising Favourability for Labour?

New Zealand Dollar (NZD) investors will be looking ahead to tomorrow’s release of October’s New Zealand building permits figure, which is expected to ease from 7.2% to -2.5%.

Tomorrow will also see the release of November’s NZ Roy Morgan consumer confidence figure. Any signs of improvement could further buoy confidence in the NZ economy ahead of Christmas.

UK political developments will continue to drive the GBP/NZD exchange rate this week, with any signs that Labour could further increase their lead in the opinion polls weighing on the Pound.

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