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GBP/NZD Outlook: Pound to New Zealand Dollar Exchange Rate Fluctuates Ahead of G20 Summit

November 30, 2018 - Written by John Cameron

GBP/NZD Exchange Rate Struggles to Continue Rally Ahead of the G20

Following the release of better-than-expected housing price figures from the UK, the Pound was able to rally against the New Zealand Dollar, climbing from NZ$1.8613 to NZ$1.8647 before the ‘Kiwi’ pushed back, with the Pound dropping 0.2% to a low of NZ$1.8589.

The figures for New Zealand building permits showed an increase from -1.3% to 1.5% in October compared to the previous month, which helped the ‘Kiwi’ push back to some extent.

On her way to the G20 Summit in Argentina, UK Prime Minister Theresa May spoke to reporters saying that she had not lost hope in winning the upcoming Brexit vote and getting her deal passed through Parliament, and that her plan would protect the ‘jobs and livelihoods and security’ of citizens.

GBP/NZD Exchange Rate Weighed Down by Bleak UK Economy Predictions

A bleak economic forecast from Bank of England Governor Mark Carney seems to be weighing down the Pound, with suggestions that if Theresa May’s deal is not passed in Parliament the economy is likely to nosedive.

Carney predicted that a no-deal Brexit is likely to cause the UK to sink into a recession, as the economy could shrink by 8% in the immediate aftermath, and lasting until the end of 2023.

It is said that in the case of a disorderly Brexit unemployment will rise to 7.5%, interest rates would reach 5.5% and house prices would fall by 30%.

Although critics have said Carney’s comments were politically motivated, they have nevertheless sparked fears that saw the GBP/NZD exchange rate slump over the course of the session this week.

New Zealand Dollar Bolstered Against Sterling (NZD/GBP) by Hawkish NZRB Comments

Over the course of this week’s session, the New Zealand Dollar was able to rally against the Pound, pushing it up to £0.54.

New Zealand’s business confidence figures for November remained unchanged from the previous reading, sitting at -37.1, while the activity outlook for November - which provides a snapshot of business outlook for the economy - increased to 7.6%, aiding the ‘Kiwi’ in its rally against Sterling.

The New Zealand Reserve Bank (NZRB) relaxed curbs on high-risk mortgage lending, stating that financial stability risks have eased, with a spokesperson commenting:

‘Both mortgage credit growth and house price inflation have eased to more sustainable rates, reducing the riskiness of banks’ new housing lending.’

The ‘Kiwi’ was lifted by the bank’s comments, allowing the currency to push back against GBP.

GBP/NZD Exchange Rate could be Volatile as G20 Summit Commences

As the G20 Summit is set to begin today, the stakes are high ahead of US President Donald Trump and Chinese President Xi’s meeting, with the stage set for a possible escalation in their war of words over trade.

If the two cannot agree on terms of trade, we could see the trade-correlated New Zealand Dollar drop against the Pound, as investors are likely to pull out of the risk-sensitive currencies such as the ‘Kiwi’.

President Trump has said that if talks are unsuccessful, he would carry out his threat to slap the remaining $267bn of annual Chinese exports to the United States with 10% to 25% tariffs.

Julian Evans-Pritchard, from Capital Economics, predicts the meeting will turn out to be a damp squib, saying:

‘The most likely scenario is that Xi Jinping doesn’t offer big enough concessions to Trump, and so nothing much comes of the G20 meeting.’
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