GBP NZD Exchange Rates Fall as NZ Political Anxiety Wanes

November 21, 2017 - Written by John Cameron

STORY LINK GBP NZD Exchange Rates Fall as NZ Political Anxiety Wanes

The Pound New Zealand Dollar exchange rate fell today despite a disappointing contraction in global dairy prices and hopeful progress in the Brexit negotiation process.

Global Dairy Prices Fall, NZD Exchange Rates Unperturbed

Recent data from New Zealand has not been overly impressive, with Sunday revealing a massive -1.1% contraction in month-on-month food prices in October and Tuesday featuring the second consecutive drop in global dairy prices at -3.4%.

Economists have blamed the fall in dairy prices on a surprise jump in production, with New Zealand dairy group Fonterra asserting today that domestic milk output climbed some 3% in October from the year before.

‘Weather conditions improved towards the latter part of the month (pushing up production)’. Fonterra said in a statement.

The New Zealand Dollar has, nonetheless, remained on top, enlivened as market apprehensions regarding the shift in political leadership slowly begin to subside.

Indeed, some economists have asserted that any possible growth-negative policies of the Labour led coalition (such as planned changes to the Reserve Bank of New Zealand’s mandate) are overdone, sentiment that has steadily risen after the RBNZ asserted that a change in leadership would not affect their monetary policy moving ahead.

GBP NZD Exchange Rates Stumble as London Makes Brexit Divorce Bill Offer

UK Prime Minister Theresa May reportedly made a £40bn offer to the EU today in an attempt to break the current Brexit negotiation deadlock.

The subject of the divorce sum remains the primary sticking point for both nations, with Brussels repeatedly refused to allow trade talks to begin unless the UK puts forth and agrees upon a set divorce payment and the UK refusing to pay until trade is decided upon.

In this regard, May’s £40bn figure is conditional; only applicable if the EU agrees to commence discussions on the proposed transition period and trade talks.

The Pound initially climbed on this news, with markets happy to see some movement in the negotiation process.

Whether this will provide enough progress to please the markets, however, remains to be seen.

May is due to meet with the President of the European Council, Donald Tusk, on Friday to discuss developments in this regard – an event that could cause even more GBP NZD volatility if the offer is outright rejected.

GBP NZD Forecast: NZ Retail Sales and UK Budget Ahead

UK Chancellor Philip Hammond is due to reveal the government’s plans for tax and spending tomorrow, an occasion that could mark the single biggest event for UK finances this year.

Markets will be predominantly concerned with the comments that the Chancellor makes about the state of Britain’s finances, however, particularly whether he announces specific measures that will be taken.

If Hammond’s sentiment proves upbeat, then the Pound New Zealand Dollar exchange rate will likely climb.

If, however, Hammond’s comments are deemed negative, then the ‘Kiwi’ Dollar could extend its gains.

Beyond this, Wednesday will feature New Zealand’s retail sales figures (excluding inflation) for Q3 – with a drop forecast from 1.7% to 0.1%.

If retail sales do indeed disappoint then it is unlikely that the NZD will remain resistant to the negative data prints for long, especially as poor retail sales could push the RBNZ away from hawkish monetary policy in 2018.

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TAGS: Daily Currency Updates Pound New Zealand Dollar Forecasts