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Waning Confidence in Government’s Brexit Plans Sends GBP/NZD Exchange Rate Down

December 6, 2017 - Written by Toni Johnson

On Tuesday’s trading session, the Pound saw a decline against the New Zealand Dollar from an opening exchange rate of 1.9616 to close at 1.9514 by the end of the day.

Lack of Brexit Impact Papers Further Damages GBP/NZD Exchange Rate

The Pound has failed to advance against the New Zealand Dollar today, seeing a -0.3% slide in the currency pairing.

Along with worries that Brexit talks won’t be concluded in time, the Pound has also been harmed by a startling admission from Brexit Secretary David Davis.

When Mr Davis was pressed for impact assessments about the UK economy after Brexit, he admitted that these documents do not exist.

The Conservatives have promptly denied that any such documents were ever going to be presented to begin with, but there are already calls to slap Davis with a ‘contempt of Parliament’ charge.

Summarising Davis’ position, BBC Assistant Political Editor Norman Smith said;

‘David Davis has probably not done the Brexit cause a huge bundle of good.

First, his admission that no impact assessments have been completed will inevitably be seized on by critics to argue Team May simply haven't done the basic spadework.

Second, his suggestion that he doesn't have the resources for this is hardly a ringing endorsement of his Brexit department.

Third, Mr Davis probably didn't help his own reputation by telling the committee he had been handed two chapters of the 850 pages of analysis but hadn't read them.

At times Mr Davis even chided the committee over the time they were taking.

The Brexit secretary at times sounded thoroughly frazzled and cheesed off. Not a great look.‘

New Zealand Dollar Advances after Australian Disappointment

Despite the lack of solid NZ data out today, the New Zealand Dollar has still risen against the Pound and even the US Dollar.

This strong showing comes from a pair of factors, the first being that demand for the Australian Dollar is not especially high.

Australia’s recent GDP figures weren’t especially impressive, which has triggered increased risk sentiment in the NZD.

Other support came from Tuesday’s Global Dairy Trade price index reading, which showed a long-awaited rise in global dairy prices.

The price growth of 0.4% wasn’t impressive to any extent, but was still a step in the right direction after a previous price drop of -3.4%.

GBP/NZD Volatility Likely to Persist as Brexit Debates Continue

Over the rest of the week, the Pound is likely to remain turbulent against the New Zealand Dollar if Brexit updates continue.

While the Irish border was a key issue earlier in the week, negotiations are expected to become broader over Thursday and Friday, covering issues like the EU divorce bill and citizens’ rights as well.

The ultimate goal of UK officials is to get so far through talks that EU leaders approve the discussion of matters like post-Brexit trade.

This has always been the primary issue for the UK, but the EU has insisted that the three above issues must be resolved beforehand.

The DUP intervention in the Irish border plans is a setback, but it is unclear whether this is enough to derail the UK’s whole Brexit strategy.

If, by a Christmas miracle, UK negotiators manage to make genuine, tangible progress in Brexit talks then the Pound could rise sharply.

Given that last week’s Brexit bill optimism only came from the UK compromising on its position, further compromises might be required for breakthroughs to be made.

Brexit news could dominate trader attention before the weekend, which might push the UK October trade balance outcome to the side-line.

This will be announced on Friday and is forecast to show a trade deficit reduction.

UK production levels are expected to have grown in October, but even this news might not get through to more Brexit-focused traders on Friday.

The week’s last remaining NZ data isn’t expected to be high-impact; this will be annual Q3 manufacturing sales figures.

While ‘low-impact’, however, a forecast-matching rise from 0.4% to 1.1% could still raise confidence in the New Zealand Dollar as a more stable currency than the Pound.
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