Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Rises 1% on Brexit Reassurance

September 24, 2018 - Written by Tim Boyer

STORY LINK Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Rises 1% on Brexit Reassurance

Last week, the Pound opened trading against the New Zealand Dollar at a level of NZ$1.9984 on Monday and closed down lower around NZ$1.9550 on Friday.

This deterioration was caused by a late-week Brexit scare, which began with Thursday’s EU summit.

Taking place in Salzburg, this summit brought together EU leaders for what GBP traders hoped would be a productive discussion about the Brexit process.

This proved to be a thwarted hope, as Prime Minister Theresa May’s so-called ‘Chequers plan’ for Brexit was rejected by all other EU leaders.

As GBP traders considered whether this meant a higher likelihood of a no-deal Brexit, the PM sent the Pound tumbling when she declared Brexit negotiations to be ‘at an impasse.’

Pound traders were further unsettled by Mrs May’s request for the EU to provide an agreeable Brexit proposal, given that this seemed to be re-running events of previously stalled talks.

The New Zealand Dollar had a better week in terms of economic news, with Q2 GDP growth rate figures revealing a faster pace of economic activity on the quarter and the year.

GBP/NZD Exchange Rate Rises 1% after Brexit Secretary Reassures Traders

The Pound has started to recover lost ground against the New Zealand Dollar today, having been pushed up by 1% by confidence-boosting statements from Brexit Secretary Dominic Raab.

Mr Raab has ruled out a general election this autumn and more importantly has also backed continuing Brexit negotiations. Dismissing the events of the previous week, Mr Raab said:

‘This is a bump in the road. We will hold our nerve, we will keep our cool and we will keep negotiating in good faith. I think we need to keep these negotiations going.’

It should be noted that while remaining positive about the chances of securing a future Brexit deal, Mr Raab also rejected opting for a ‘Canada-style’ trade agreement.

This once again puts the issue of trade at the forefront of Brexit talks, as neither side has yet proposed a satisfactory solution to the issue of UK-EU trade.

Northern Ireland is seen as something of a sticking point, as EU offers would separate the country from the UK in a trading sense, something seen as intolerable in Northern Ireland and Westminster.

NZD/GBP Exchange Rate Weakened by Risk of Fed Interest Rate Hike

The New Zealand Dollar has fallen back against the Pound and other currency peers today, more down to uncertainty about this week’s news that any previous data.

NZD traders are concerned that this Wednesday’s US Federal Reserve interest rate decision will result in a rate hike from 2% to 2.25%; such a decision could send the New Zealand Dollar plummeting in value.

Higher interest rates in the US often strengthen the US Dollar to the detriment of commodity currencies like the New Zealand Dollar, which fall as a result of reduced risk sentiment.

Pound Sterling to New Zealand Dollar Forecast: Will Growing NZ Trade Deficit Improve GBP/NZD Exchange Rate?

The next high-impact UK data isn’t due out until Friday this week, but the Pound could still extend its current lead against the New Zealand Dollar before then.

New Zealand trade balance data is due out on Tuesday evening and current expectations are for a sizable expansion of the existing trade deficit.

If August’s reading expands from NZ$-143m to NZ$-930m, the New Zealand Dollar could drop and the Pound could rise higher in the GBP/NZD exchange rate.

Moving ahead to this Friday, UK finalised GDP and business investment figures for Q2 2018 are due out during the morning.

The GDP growth rate figures are tipped to show a faster pace of activity on the quarter and the year, which might be enough to boost the GBP/NZD exchange rate.

Less positively, however, while quarterly business investment is tipped to rise a year-on-year slowdown is also anticipated.

Annual figures are usually considered the more high-impact readings, so Pound to New Zealand Dollar gains may be limited on such news.

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TAGS: Pound New Zealand Dollar Forecasts