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GBP NZD Exchange Rate Drops on Mixed Signals for Brexit Process

October 26, 2017 - Written by Frank Davies

On Wednesday, the Pound rose dramatically against the New Zealand Dollar. The GBP NZD pairing advanced from an initial rate of 1.9000, later closing higher at 1.9257.

GBP Loses Ground on Contrasting Statements on Brexit Vote



The Pound was in extremely high demand against the New Zealand Dollar on Wednesday, but has since dropped by -0.3% because of growing concerns about Brexit specifics.

During an exhaustive Brexit Select Committee meeting on Wednesday, Brexit Secretary David Davis was forced into reversing a statement on a key aspect of the leaving process.

When asked if the final vote on the Brexit would come after the UK had actually left the EU and entered a transitional period, Davis said;

‘It could be. It depends when it concludes’.


This sparked fears that the government would have the final say on what kind of Brexit deal was signed up to, preventing any alterations by MPs.

A Downing Street spokesman later contradicted Davis’ statement, saying;

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‘A final deal will be agreed before we leave and MPs will have a vote on it’.


Davis’ assertions were also questioned by Theresa May herself, who said;

‘I am confident…that we will be able to achieve that agreement and that negotiation in time for this parliament to have that vote that we have committed to’.


Davis also raised eyebrows with his assumptions about trade deals with the EU, a key topic that still hasn’t been discussed in official negotiations.

The Brexit Secretary gave an over-ambitious comment about securing a post-Brexit trade deal, something not even possible until the UK actually leaves the multinational union.

Davis said that this fact of law was ‘technically’ true, but claimed that the UK could have a trade deal with the EU ‘a nanosecond’ after leaving.

Given that it took at least 7 years for Canada to negotiate a trade deal with the EU, Davis’ forecast of a near-instantaneous trade agreement being reached has drawn more than a little scepticism.

There has also been poor UK economic news today, concerning car production levels in September.

During the month, it has been reported that UK output of vehicles declined, fuelled by a -14% drop in demand for cars.

Looking at the data was Mike Hawes, SMMT Chief Executive. Mr Hawes said;

‘With UK car manufacturing falling for a fifth month this year, it's clear that declining consumer and business confidence is affecting domestic demand and hence production volumes.

Brexit is the greatest challenge of our times and yet we still don't have any clarity on what our future relationship with our biggest trading partner will look like, nor detail of the transitional deal being sought.

Uncertainty regarding the national air quality plans also didn't help the domestic market for diesel cars, despite the fact that these new vehicles will face no extra charges or restrictions across the UK’.


New Zealand Dollar Weakened by Radical Government Policies



The New Zealand Dollar has advanced against the Pound today, but has otherwise fallen in value because of political news.

Keen to make her mark on the country after coming to power, Prime Minister Jacinda Ardern has unveiled a policy to ban foreign buyers from purchasing existing homes in the country.

This measure is designed to cut off the flood of wealthy overseas investors dominating the national housing market, but is still a radical change of direction for the nation.

Backing Ardern on the issue, Deputy Prime Minister Winston Peters said;

‘There’s going to be a change and a clear signal sent internationally that New Zealand is no longer for sale in the way it has been. And we are happy with that’.


Pound Turbulence ahead on BoE Interest Rate Decision



The Pound could rally against the New Zealand Dollar on November 2nd, if the Bank of England (BoE) raises the UK interest rate.

Forecasts are mixed over whether the bank will commit to higher rates in November; some think that this is premature, while others believe the UK could be long overdue for higher interest rates.

The next NZ news will come on October 30th, covering building permits in September.

During the month, forecasts are for a reduction of -3.2%, which might trigger an NZD crash.
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