March 15, 2019 - Written by Tim Boyer
STORY LINK Pound to New Zealand Dollar Exchange Rate: GBP/NZD Firms Significant Gains despite Friday Slip
A slight flare up in Brexit uncertainty towards the end of the week ultimately had little impact on the British Pound to New Zealand Dollar (GBP/NZD) exchange rate, as fading concerns that a no-deal Brexit was possible helped the Pound to sustain major gains.
Still, the New Zealand Dollar was able to push GBP/NZD back slightly from its best levels due to these uncertainties as well as weakness in NZD rivals.
After opening this week at the level of 1.9126, GBP/NZD spent most of the week surging as no-deal Brexit bets were doused. GBP/NZD briefly touched a high of 1.9483 on Thursday, which was the best level for the pair since early March.
While GBP/NZD has slipped slightly since then, it has still sustained most of its weekly gains and trended closely to the level of 1.9375 at the time of writing.
Investors were hesitant to keep buying the Pound, as uncertainties about next week’s Brexit events came into focus following the past week’s major Brexit votes.
GBP Exchange Rates Slip from Best as Upcoming Brexit Developments Take Focus
The past week has been a highly bullish week for the Pound, as major Brexit votes in UK Parliament have finally started to forge some kind of path for the process after months of uncertainty since the beginning of 2019.
While the government’s Brexit plan was blocked by Parliament yet again, since then Parliament also voted to hugely reject the possibility of a no-deal Brexit, as well as vote for Article 50 and the formal Brexit date to be delayed.
The biggest jump in demand for the Pound came after Parliament unexpectedly voted in favour of an amendment saying that the UK should not seek a no-deal Brexit under any circumstances.
However, towards the end of the week the Pound’s rally slowed as markets became a little more anxious about how Brexit would unfold from next week onwards.
The UK government aims to hold a third meaningful vote on its Brexit plan next week, and depending on how it goes will negotiate a delay to Brexit with the EU.
Uncertainty over how far Brexit will be delayed, as well as whether or not the EU will allow it, is limiting the Pound’s demand today.
There is also concern about how late things have been left, with UK businesses and economic activity suffering as a result. According to Adam Marshall, Director General at the British Chambers of Commerce (BCC):
‘Once again, businesses are left waiting for Parliament to reach a consensus on the way forward and are losing faith that they will achieve this.
In the meantime, firms are continuing to enact their contingency plans, anxiety amongst many businesses is rising, and customers are being lost.’
NZD Exchange Rates Edge Higher amid Weakness in Rivals
Investors sold the US Dollar (USD) last week, and the typically resilient and safe haven currency continued to weaken on Friday due to numerous factors.
The US currency was weaker on the past week’s mixed or underwhelming US ecostats.
Towards the end of the week, concerns that US-North Korea denuclearisation talks could fall through also limited demand for the US Dollar and left riskier currencies like the New Zealand Dollar more appealing by comparison.
Demand for the New Zealand Dollar was also slightly supported by February’s New Zealand business PMI, which beat forecasts and rose from 53.0 to 53.7.
Still, the New Zealand Dollar’s strength was limited due to mixed risk-sentiment and the Pound’s broadly strong performance throughout the week.
GBP/NZD Exchange Rate Forecast: Next Brexit Developments and New Zealand Growth Ahead
Another week of volatility looks set for the Pound outlook, as the UK government will rush to further its Brexit plans ahead of March the 29th – which is still set as the formal Brexit date.
The government aims to hold another meaningful Brexit vote in Parliament on Tuesday. As hard Brexit supporters believe Brexit should not be delayed, there is a possibility that the government Brexit deal will see a surge in demand during its third vote.
If the plan does manage to pass, it will cause a surge in Sterling as a soft Brexit will have been confirmed.
If it fails though, market attention will turn towards UK-EU negotiations over delaying the Brexit process.
Signs that the Brexit process will be delayed for a long time would offer the Pound some relief, but attention would quickly turn to how exactly the UK wishes to proceed with Brexit once the delay is in place.
Brexit developments are likely to be the primary cause of GBP/NZD movement next week, but the upcoming Bank of England (BoE)
policy decision and New Zealand growth data could prove influential as well.
Thursday’s New Zealand growth rate stats from Q4 could cause notable movement in the ‘Kiwi’ and the Pound to New Zealand Dollar exchange rate if they surprise investors.
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