GBP NZD Exchange Rate Trended Higher as Market Confidence Faded

March 27, 2017 - Written by Tim Boyer

STORY LINK GBP NZD Exchange Rate Trended Higher as Market Confidence Faded

The British Pound to New Zealand Dollar exchange rate fell back from its 2017 highs on Tuesday afternoon as Brexit jitters increased ahead of Wednesday’s key session.

Investors also bought risk-correlated currencies like the New Zealand Dollar up from their recent lows, following the risk-off rush on Monday. GBP/NZD is likely to be highly volatile on Wednesday as the Brexit will finally begin.

[Previously 28/03/2017]

Even with the Scottish parliament looking set to support Nicola Sturgeon’s call for a second independence referendum the Pound New Zealand Dollar exchange rate maintained a bullish trend.

However, political uncertainty is likely to put increased downside pressure on the Pound this week, particularly once Article 50 is formally triggered.

[Previously updated 27/03/2017]

As risk appetite weakened substantially at the start of the week the Pound Sterling to New Zealand Dollar exchange rate was prompted to trend sharply higher.

GBP Trends Higher Despite Impending Brexit Trigger

Although Theresa May is due to activate Article 50 on Wednesday the Pound (GBP) has remained on a stronger footing, with much of the Brexit risk already thought to be priced in.

Sterling also benefitted from the political worries mounting in the US, with investors favouring it over both the US Dollar (USD) and more risk-sensitive assets.

However, some jitters are likely for the GBP NZD exchange rate once the process of exiting the EU begins in earnest.

Uncertainty continues to dominate the outlook as the UK will have only two years to negotiate the terms of its new relationship with the EU, with the risk of a ‘cliff edge’ exit likely to limit the appeal of the Pound.
As researchers at Deutsche Bank noted:

‘The market should hope for the best but plan for the worst. Time constraints, the scale and complexity of talks and the threat that a soft deal represents to EU means the UK faces an uphill battle to avoid a hard outcome. The political difficulties only look resolvable with an early UK general election.’

Rising Doubts over Prospect of US Fiscal Reforms Weigh on NZD

The ‘Kiwi’ (NZD) fared more positively than its antipodean cousin in the face of weakening confidence in the US administration.

Even so, the increasing doubts over Trump’s ability to deliver on promised fiscal stimulus and tax cuts saw the appeal of the commodity-correlated New Zealand Dollar soften markedly.

With fresh domestic data limited in the coming week investors have seen little reason to buy into the vulnerable ‘Kiwi’ at this juncture.

While the Federal Reserve still seems on track to tighten monetary policy at a slower pace the prospects for global growth appeared diminished, particularly as US protectionist rhetoric continues to deepen.

GBP NZD Exchange Rate Forecast: US and UK Political Uncertainty Dominates Outlook

If markets remain bearish and optimism over the Trump presidency continues to diminish this could keep the GBP NZD exchange rate on a stronger footing.

A positive showing from Friday’s NBNZ business confidence index may offer the New Zealand Dollar a rallying point, however, if domestic sentiment continues to demonstrate resilience.

Any further signs of weakening consumer confidence in the UK, meanwhile, could weigh on the Pound.

With the Bank of England (BoE) looking set to maintain a neutral outlook for the foreseeable future support for Sterling could be limited, particularly as the final outcome of the Brexit process remains uncertain.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Pound New Zealand Dollar Forecasts