New Zealand Dollar Under Pressure as Trade Wars Escalate

New Zealand Dollar Exchange Rate: More Falls Expected as Coronavirus Shows No Let-Up

The Pound has moved higher against the New Zealand Dollar this week although this is more to do with New Zealand Dollar weakness rather than Sterling strength. The ongoing trade war stemming from China and the US is definitely one to keep an eye on at the moment and the latest developments are having a direct impact on the commodity currencies which includes the New Zealand Dollar. The EU has been dragged into this now and have specifically targeted Harley Davidson as a company that it will impose trade tariffs on. The response from Harley Davidson is that it will now look to move jobs out of the US and into countries such as India to remain competitive. This has not been the desired outcome for US President Donald Trump.

Whilst New Zealand is not embroiled in such a dispute at present the kiwi Dollar is heavily impacted as the fear is that further escalations are likely to hamper global growth. The commodity currencies generally don’t perform so well when global growth is weak. In a sign of further escalations to come it has been reported that the US Treasury department is seeking to draft legislation that will prevent companies which are at least 25% Chinese owned from buying US tech firms. The US have also signalled that this will not just apply to Chinese firms and it is this continual rhetoric which is putting pressure on the New Zealand Dollar. The period doesn’t look so bright for the New Zealand Dollar with all of this going on in the global arena.

This week should be particularly interesting as we approach the EU summit which commences this Thursday, and where an update on the progress on the Brexit negotiations is to be expected. Anything positive which indicates that a trade deal is on the cards should be seen as positive for the Pound although it might be a little too soon for a statement like this to be made. If anything the risk of a no deal scenario is potentially growing and the EU has told companies including banks to make preparations for a no deal scenario. Any rhetoric this week which suggests that there are complications beyond Ireland could spell trouble for the Pound. Clients with a pending requirement would be wise to get in touch to plan around this important event. Brexit remains the single biggest driver for Sterling exchange rates and these key dates in the diary can result in substantial volatility for those clients looking to buy or sell New Zealand Dollars.

New Zealand trade data for May is released this evening where a trade surplus is expected although considerably less than the previous month. Anything positive on trade is likely to help the New Zealand Dollar make gains especially considering global trade is topical right now.

UK Gross Domestic Product (GDP) data is released on Friday and should help direct the price of Sterling. There have been some murmurs that GDP for this year may have been underestimated and so a positive jump on Friday could help see the Pound rally higher. I am optimistic in this regard and already some of the recent economic data has proven resilient despite the ongoing Brexit uncertainty. If the economic growth outlook picks up then this should help support the Pound considerably. For the moment the Bank of England are likely to raise interest rates once this year and the betting is whether this happens in August or November. Any increased likelihood of an August hike will only help push the Pound up higher across all of the major currencies including the New Zealand Dollar.

For more information on how these economic and political events are likely to impact on your own currency transfer and how to make the most of any opportunities in the markets then please feel free to contact me at jll@currencies.co.uk.