GBP/NZD Q4 2020 Research Forecast

New Zealand’s economy has nervously awaited an update from the Reserve Bank of New Zealand (RBNZ) in relation to negative interest rates. The prospect rates below zero had caused the New Zealand dollar (NZD) to trade cautiously amongst its major competitors over past weeks.

However, following recent news that the RBNZ are to rethink their interest rate strategy, has since bolstered the New Zealand dollar (NZD) and provided a much more optimistic outlook for New Zealand’s economy.

During November’s monetary policy meeting, the RBZ stated that New Zealand’s interest rates could be higher than what they had initially inferred during their meeting in August.

The prospect of a COVID-19 vaccine soon becoming available has also increased optimism for the New Zealand dollar (NZD), suggesting the end of lockdowns could soon be on the horizon.

Take a look as we report on the progress of the New Zealand dollar (NZD) as well as the outlook for New Zealand’s economy for Q4.

Current progress of the British pound to New Zealand dollar (GBP/NZD)

We have seen some recent wavering of the British pound to New Zealand dollar (GBP/NZD) due to a multitude of reasons. Most notably the uncertainty of Brexit, rising UK cases of COVID-19 and disappointing inflation data for New Zealand last month were all to blame.

At the time of writing, the British pound to New Zealand dollar (GBP/NZD) exchange rate stands at NZD 1.92, with the RBNZ’s interest rate announcement causing the New Zealand dollar to edge higher.

With a looming Brexit deadline and months of seemingly little negotiation progress, has weighed heavily on the pound (GBP). With ongoing disputes concerning fisheries, it has led many to fear that the UK could face a no-deal Brexit, which could cause the pound (GBP) to plunge further.

New Zealand’s economic outlook seemed bleak last month as it was reported that the country’s inflation rose by 0.7% in Q3 as a result of COVID-19 struggles.

Outlook for British pound to New Zealand dollar (GBP/NZD) in Q4

The outcome of Brexit will be the main focus of the progress of the pound to New Zealand dollar pairing (GBP/NZD) for Q4. A deadline of 19th November has been put in place and whether the UK and EU can reach a draft deal by this time remains to be seen.

The past few weeks seem to have provided some optimism for a UK/EU deal, with both sides stating that they are willing to make compromises for the greater good.

The UK’s second lockdown will also have a huge impact on the pound’s (GBP) Q4 outlook. With thousands of businesses having to close their doors once again, the UK economy will be rocked further as it’s likely that some businesses will result in shutting their doors for good.

New Zealand is looking ahead for the outcome of October’s PMI report. Investors remain cautious as forecasts indicate that the manufacturing index could fall from 54.0 in September to 46.6 for October.

If this is the case, the data will undoubtedly cast a shadow over New Zealand’s recovering economy as well as an uncertain future for the manufacturing industry.

Domestic factors – pressure or prop?

An improvement in the New Zealand unemployment levels could also provide a boost to the recently beleaguered New Zealand currency. During July to September 2020, data has indicated that unemployment within New Zealand rose from 4% to 5.3% within this period.

Whilst the rise is significant, it remains in line with economist’s recent predictions and is nowhere near the rates that were predicted at the beginning of the year. It was initially believed that unemployment could rise by as much as 8%, making the recent figures seem not so pessimistic.

Global threats

The performance of the Chinese economy also has knock-on effects on New Zealand through their close trading relationship. Poor Chinese Purchasing Managers’ Index (PMI) data in the past has added to the New Zealand Dollar’s woes, often causing traders to sell NZD following disappointing results.

That being said, October PMI data for China has shown signs of strength, rising to 56.8 in comparison to September’s 54.8.

With so many factors set to steer the pound to New Zealand dollar (GBP/NZD) rate off course, it is difficult to say exactly how the pair will stand at the end of the year. One thing that is for certain is that neither economy is without its challenges.