GBP/NZD Weakens on Reports of Business Brexit Damage

February 6, 2017 - Written by Frank Davies

STORY LINK GBP/NZD Weakens on Reports of Business Brexit Damage

The British Pound to New Zealand Dollar exchange rate slightly narrowed its losses on Tuesday afternoon due to hawkish comments from Bank of England (BoE) policymaker Kristin Forbes.

While the Pound was supported by Forbes’ claim that the UK economy may soon need to be supported by a BoE interest rate hike, the currency still lost out against the risky ‘Kiwi’ throughout the day.

[Previously updated 07/02/2017]

As MPs failed to pass any amendments to the government’s Article 50 bill on the first day of debate in the Commons the Pound to New Zealand Dollar exchange rate weakened.

Upward growth in the Reserve Bank of New Zealand’s two-year inflation expectation report helped to bolster demand for the ‘Kiwi’, meanwhile, limiting the detrimental impact of hawkish Fed commentary.

[Previously updated 06/02/2017]

A slew of negative reports on the impact of Brexit has weakened the Pound Sterling to New Zealand exchange rate today.

Brexit Surveys Cause GBP/NZD to Edge Lower

A survey from the British Chambers of Commerce (BCC) has revealed that over half of UK firms have price hikes planned during 2017 in response to the weakened value of the Pound.

Ipsos Mori has released poll results showing 58% of business leaders think the vote for Brexit has already harmed their business, with two thirds of executives anticipating the situation will worsen for their businesses after Britain leaves the EU.

Also, Hermes Investment Management Chief Economist Neil Williams has claimed it will be very hard for the UK to secure a Brexit deal in just two years, noting;

‘Turkey and Canada have enjoyed customs-union access with the EU without membership. Canada’s in 2016 came after seven years of negotiation. And, needing sign-off by all EU states, it was stalled by the Belgian region of Wallonia!’

Meanwhile, new car sales jumped to a 12-year high in January after annualised growth of 2.9%. However, IHS Global Insight Economist Howard Archer expects to see price increases across 2017, weakening the outlook for the automotive industry.

Potential for RBNZ to Abandon Easing Bias Boosts NZD

The approach of this week’s monetary policy decision from the Reserve Bank of New Zealand (RBNZ) is boosting the New Zealand Dollar today.

Morgan Stanley notes that the currency has some strong fundamentals behind it, notably ‘last week's positive CPI print, signs of increasing immigration, and expectations for a strong dairy auction supporting NZD.’
In fact, the bank believes the RBNZ may even move to a neutral policy bias. Morgan Stanley analysts explain;

‘We don't see RBNZ pricing as extreme right now and despite NZD TWI strength, expect the RBNZ could remove its easing bias at this week's meeting.’

This is pushing the New Zealand Dollar to Pound Sterling exchange rate higher.

GBP/NZD Exchange Rate Forecast; NZD to Drive Movement after Dairy Auction Results

There is no UK or New Zealand economic data on the calendar today, leaving investors to look forward to tomorrow’s releases.

Things remain sparse for the UK, with only low-impact retail sales and house price data scheduled for publication.

Things could be more volatile for the New Zealand Dollar, however, as the latest Global Dairy Trade auction will take place. The last event saw a five-week trend of worsening results broken by price growth of 0.6%. Investors will be hoping for another rise, which may suggest the commodity has returned to an uptrend.

The RBNZ policy decisions will be announced in Wednesday evening.

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