February 18, 2019 - Written by David Woodsmith
STORY LINK GBP to NZD Exchange Rate Limp as Investors Digest Last Week?s News
After a plummet last week on Reserve Bank of New Zealand (RBNZ) and Brexit news, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate’s movement has steadied this week. Investors were hesitant to keep buying the New Zealand Dollar higher and sold it slightly from its best levels in profit-taking.
Last week saw GBP/NZD open at the level of 1.9187, before spending most of the week plunging. After touching a fresh 2019 low of 1.8679, GBP/NZD rebounded slightly and closed the week at the level of 1.8783. The rebound continued this week and the pair trended closely to the level of 1.8824 at the time of writing.
GBP Exchange Rate Strength Limited as Brexit Uncertainties Persist
Last Thursday, the UK government failed to secure a Parliament mandate for its Brexit negotiation stance. As a result, investors don’t expect fresh UK-EU Brexit negotiations to be particularly productive, and this is weighing on the Pound’s potential for gains.
With just about 40 days until the UK is set to formally leave the EU, and with no agreed plan for Brexit in place, fears persist that the UK could end up with a worst-case scenario No-deal Brexit.
As No-deal Brexit fears return, the Pound has become less appealing.
Friday’s UK retail sales results were stronger than expected and helped offer the Pound some support, but overall the data was not enough to improve the Sterling outlook which is dominated by Brexit.
NZD Exchange Rates Avoid Major Losses amid US-China Trade Hopes
While some investors opted to sell the risky New Zealand Dollar slightly from its best levels today, the Pound’s gains were limited both by Brexit jitters but also by higher market demand for risky trade-correlated currencies.
The New Zealand Dollar surged last week due to fading Reserve Bank of New Zealand (RBNZ)
interest rate hike bets, but also higher hopes that the US and China would be able to reach an agreement on long-standing trade tensions.
US-China trade negotiations resumed last week, and both nations have reported progress in high-level talks.
There are hopes that a trade deal between the nations is in sight, and this is making investors more willing to take risks again as global trade jitters lighten.
GBP/NZD Exchange Rate Forecast: New Zealand Data and Political Developments in Focus
Tuesday’s Asian session will see the publication of New Zealand’s January services PSI. Some analysts predict the figure will have improved, but if the data falls short then GBP/NZD is more likely to continue its climb tomorrow.
Britain’s December job market report will be published too, but the data is unlikely to be hugely influential unless it is particularly surprising.
Even then though, the Pound is likely to be most influenced by potential Brexit developments.
The UK government is still attempting to renegotiate its Brexit deal with the EU with only 40 days to spare, though analysts do not expect these talks will be productive.
Meanwhile, US-China trade negotiations are still ongoing as well, and analysts expect these are more likely to show results over the coming weeks.
Any signs that the deadline will be expected or that a deal is in sight would make the risky New Zealand Dollar more appealing.
Of course, Tuesday’s Global Dairy Trade (GDT) auction could influence movement in the commodity-correlated New Zealand Dollar as well if it surprises investors.
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TAGS: Pound New Zealand Dollar Forecasts