GBP to NZD Exchange Rate Sheds Weekly Gains as Risk-Sentiment Rises on Korea News

March 6, 2018 - Written by Ben Hughes

STORY LINK GBP to NZD Exchange Rate Sheds Weekly Gains as Risk-Sentiment Rises on Korea News

A lack of supportive factors in Pound trade left the British Pound to New Zealand Dollar (GBP/NZD) exchange rate shedding its Monday gains during Tuesday’s session. Investors found risky investments like the New Zealand Dollar more appealing due to global political news.

Last week’s wide GBP/NZD fluctuations were largely caused by Brexit uncertainties. This week however, GBP/NZD briefly advanced from the week’s opening level of 1.9077 to a high of 1.9173 before slipping to just below the week’s opening levels again.

GBP Exchange Rates Limp as Brexit Concerns Weigh

The Pound was briefly supported by UK PMI data on Monday, which was one of the reasons the Pound to New Zealand Dollar (GBP/NZD) exchange rate spent most of yesterday climbing.

Markit’s UK services PMI was forecast to have edged higher from 53 to 53.3, but instead jumped to a better than forecast 54.5. This was the print’s best result in four months.

It boosted the overall composite PMI for February, which ended up beating expectations and also printing at 54.5.

However, Sterling’s gains on the back of these results were limited. The PMIs did not significantly impact Britain’s economic outlook and investors remained highly concerned about the latest clashes in Brexit negotiations.

Last week, UK Prime Minister Theresa May rejected an EU draft proposal’s stance on the issue of the Irish border.

Her speech on Friday followed by offering some reassurances to both sides of the UK Conservative Party, but was not perceived by markets as any sign that significant progress had been made on key issues like a UK-EU transition period.


On Monday, comments from UK Chancellor Philip Hammond that the government would continue to prepare for a potential ‘hard Brexit’ even if a transition period is secured also weighed on Sterling.

He said;

‘We may well have to continue with planning for a no-deal exit at the end of the implementation period as a contingency, but we will make sure that we are not spending money on outcomes which have been effectively ruled out.’

Markets have perceived this as a sign of low confidence from the government about the chances of the Brexit process ending with a good UK-EU deal. Essentially, Brexit uncertainty is keeping pressure on the Pound once again this week.

NZD Bolstered by Market Risk-Rally on Hopes for Korean Diplomacy

Since Monday evening, risk-correlated currencies like the New Zealand Dollar have been much more appealing.

This was initially due to news that some in the US Republican Party may attempt to oppose or even block the US Presidency’s plans for stricter trade tariffs.


As a result, market concerns of a ‘trade war’ faded slightly during Tuesday’s session and investors round risky trade-correlated currencies an appealing buy again.

However, political news made risk investment even more appealing on Tuesday. Reports that North and South Korea had agreed to hold summit talks in April 2018 left markets hopeful that tensions between North Korea and major nations like South Korea and the US could abate.

According to Fawad Razaqzada from Forex.com;

‘Risk appetite has improved on headlines North Korea has expressed a willingness to talk about denuclearization, according to South Korea. The North is apparently willing to discuss surrendering its nuclear weapons and freeze nuclear and missile programmes if it begins direct talks with the US. This is a dramatic easing of tensions. It follows a visit by senior South Korean politicians.’

GBP/NZD Forecast: Could Risk-Sentiment Remain High?

The Pound to New Zealand Dollar exchange rate could continue to slide in the coming days if markets continue to demand risk-correlated currencies.

Further signs of diplomacy from North Korea towards South Korea or the US could further calm markets and make investors more eager to keep rallying in risky assets like the New Zealand Dollar.

However, the New Zealand Dollar’s risk-driven rally may be limited if the US Dollar (USD) becomes more appealing again, or if there are any optimistic Brexit developments.

Fresh signs that the UK and the EU are getting closer to reaching an agreement on a post-Brexit transition period would not only keep ‘hard Brexit’ fears at bay, but would also boost bets that the Bank of England (BoE) could hike UK interest rates again as soon as May 2018.

Political news is more likely to drive the Pound to New Zealand Dollar exchange rate in the coming sessions, at least until New Zealand manufacturing stats are published on Thursday.

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TAGS: Pound New Zealand Dollar Forecasts