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GBP to NZD Exchange Rate Volatile as Investors Anticipate Brexit Developments

April 10, 2019 - Written by Toni Johnson

Investors are heavily hesitant to move much on the Pound this week so far, as markets anticipate major news of whether or not the Brexit process will be delayed for a second time and as a result the British Pound to New Zealand Dollar (GBP/NZD) exchange rate has seen limited movement. This could change following today’s Brexit news, however.

Due to a surge in bets that the Reserve Bank of New Zealand (RBNZ) will cut New Zealand interest rates soon, GBP/NZD saw a jump in demand last week that took the pair from the level of 1.9165 to close the week near the level of 1.9362. At the time of writing today, GBP/NZD hadn’t moved too far from the week’s opening levels and trended near the level of 1.9369.

While the Pound’s movement has been limited on uncertainty over whether a Brexit will be delayed or not, the New Zealand Dollar has been unappealing recently.

No new fresh downside movement is weighing on the New Zealand Dollar today, but the currency has been unable to benefit against a weaker Pound either.

GBP Exchange Rates Remains Limp on Brexit Jitters despite Rising UK Growth

Since the end of last week, investors have been hesitant to hold onto the Pound with mere days to go until the current formal Brexit date.

Britain is still set to leave the EU on Friday the 12th of April, and as no deal or further delay has been agreed yet this means the possibility of a no-deal Brexit persists.

Demand for the Pound was a little stronger last week on hopes that UK Prime Minister Theresa May would be able to reach a compromise Brexit plan with opposition Leader Jeremy Corbyn.

However, investors have since become more doubtful that those talks will succeed any time soon, leaving Pound investors anxiously anticipating whether or not the UK and EU will be able to agree to another Brexit delay.

The EU is seemingly set to offer Britain a delay until the end of the year which has been more or less priced into the Pound already, but this is keeping investors concerned about the long-term uncertainty that another Brexit delay would bring.

Due to Brexit jitters, the Pound has been unable to benefit from the latest rise in UK growth.

Britain’s February growth rate results beat expectations according to this morning’s report, coming in at 0.3% rather than the expected 0.2% in its 3 month average print.

However, some analysts noted that growth uncertainties persisted and part of the stronger growth was due to Brexit stockpiling.

NZD Exchange Rates Remains Unappealing as RBNZ Rate Cut Bets Persist

In recent weeks, the relatively risky trade-correlated New Zealand Dollar has been broadly unappealing as signs of domestic weakness and impact from a global growth slowdown concern investors.

The Reserve Bank of New Zealand (RBNZ) has indicated that it could cut New Zealand Dollar exchange rates in the foreseeable future, with some investors betting it could happen as soon as the coming months.

This has kept pressure on the New Zealand Dollar, and recent rises in risk-sentiment have benefitted the currency’s rivals more.

Stronger Chinese data and US-China trade hopes made investors more willing to take risks this week so far, but the New Zealand Dollar remains unappealing on RBNZ rate cut bets.

GBP/NZD Exchange Rate Forecast: Brexit News to Dominate Movement

With no notable New Zealand data coming in until later in the week, the Pound to New Zealand Dollar’s biggest movements this week are likely to be driven by Brexit developments.

Investors generally expect the UK and EU will be able to agree to delay the Brexit process until near the end of the year.

This is largely priced in the Pound already, but this outcome would still offer some relief and make it easier for the Pound to gain on other news, such as soft Brexit hopes.

The risk-correlated New Zealand Dollar is unlikely to have much reason to climb in the coming sessions unless Brexit fears worsen and knock the Pound lower.

NZD may even be in for further weakness if upcoming US inflation and Federal Reserve meeting minutes news impresses investors and dampens risk-sentiment.

In terms of New Zealand Dollar support, New Zealand’s food inflation data due tomorrow, and business PMI data due on Friday, could bolster NZD demand if they impress and this may cause some late-week Pound to New Zealand Dollar exchange rate losses.
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