Pound New Zealand Dollar Exchange Rate Improves, US-China Trade Uncertainty Drags on ‘Kiwi’

December 10, 2019 – Written by John Cameron

GBP/NZD Exchange Rate Edges Highers as US’ December Tariffs Haunt NZ Markets

The Pound New Zealand Dollar (GBP/NZD) exchange rate rose by 0.3% today, with the pairing currently trading around NZ$ 2.013 as US-China trade uncertainties continue to drag on the risk-sensitive ‘Kiwi’.

This follows reports of key negotiators planning a delay for the 15th December tariffs on Chinese exports, a move which could jeopardise relations between the world’s two largest economies.

Christopher Hill, former US Assistant Secretary for East Asian and Pacific affairs, commented:

‘Mistrust is the most difficult thing to remove from the negotiation. China’s concerned that they can’t really reach a deal because they can’t rely on it. On the US side, there is a perception that China also has credibility problems.’

With China being New Zealand’s largest trading partner, signs of unrest between the two superpowers weighing on market confidence in the risk-averse ‘Kiwi’.

In New Zealand economic data, today will see the release of New Zealand’s Electronic Card Retail Sales figure for November, which is expected to rise from -0.6% to 0.5% on the month.

However, with the focus remaining firmly on global trade developments, this is unlikely to provide much uplift for the New Zealand currency.

GBP/NZD Exchange Rate Rises Despite Weaker-Than-Expected UK Economic Growth

The Pound (GBP) edged higher against NZD today despite weaker-than-expected UK growth in October, with the month-on-month figure stagnating at 0% due to Brexit uncertainty.

John Hawksworth, Chief Economist at PwC, was downbeat in his analysis, saying:

‘GDP was flat in both October alone and the three months to October, confirming a loss of momentum in the economy since the summer due to Brexit-related uncertainty and slower global growth.’

Today also saw the UK Industrial Production figure for October slow to a worse-than-expected 0.1% due to slowing global trade.

However, with Thursday’s general election fast approaching, UK economic data has had little effect on Sterling today, with traders focusing on political developments instead.

Pound (GBP) investors are looking ahead to this evening’s release of the updated YouGov MRP poll.

Any signs of the Labour Party narrowing their gap with the Tories would prove Pound-negative due to rising fears of a hung Parliament on Thursday.

GBP/NZD Outlook: UK General Election Developments Continue to Drive Sterling

New Zealand Dollar (NZD) traders will be looking ahead to tomorrow’s release of the New Zealand REINZ House Price Index for November, with any signs of improvement providing some uplift for the ‘Kiwi’.

US-China trade developments will also remain in focus this week, with any indications of trade negotiations stalling before Christmas likely weighing on sentiment in the risk-sensitive NZD.

Sterling traders, meanwhile, will be looking ahead to Thursday’s general election.

The Pound could sink, however, if there are signs that the Conservatives are losing some of their lead in the opinion polls, as this would exacerbate Britain’s political uncertainties over Brexit.

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