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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Sinks Thanks to Prime Minister’s Numbered Days

May 23, 2019 - Written by Frank Davies

Increasing Pressure on Theresa May Pulls Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Lower

An increasing sense of political turmoil in the UK saw the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate come under fresh pressure as the odds of a no-deal Brexit increased.

However, as Theresa May made efforts to eke out her time in Number 10, meeting with various cabinet ministers with a view to altering her latest controversial Brexit proposals, this helped to limit the Pound’s weakness.

Although markets still expect to see May depart sooner rather than later investors found relief in this temporary stay of execution.

As a result, GBP exchange rates were able to reverse some of the previous day’s decline, even though the Pound remained generally biased to the downside.

Deteriorating Global Trade Conditions Dampen New Zealand Dollar (NZD) Demand

The continued souring of trade relations between the US and China put some pressure on the New Zealand Dollar, meanwhile, as market risk appetite remained muted.

NZD exchange rates struggled to find much in the way of traction on Thursday as markets braced for the prospect of a prolonged period of trade tension.

With global growth likely to weaken in response to the trade spat the appeal of the risk-sensitive New Zealand Dollar was naturally limited.

Anticipation ahead of the latest raft of New Zealand trade data also weighed on NZD exchange rates, adding to the bearish mood.

Narrowing NZ Trade Surplus to Weigh on New Zealand Dollar (NZD) Exchange Rates

Forecasts point towards the New Zealand trade surplus narrowing from 922 million to 400 million in April, undermining confidence in the outlook of the domestic economy.

A sharp decline in export volumes could see the New Zealand Dollar trending lower across the board, given the general decline in global trade conditions seen in recent weeks.

With the domestic economy already showing signs of slowness any significant deterioration in trade looks set to put NZD exchange rates on a downtrend.

On the other hand, if exports show an increase on the month this may encourage investors to pile back into the New Zealand Dollar as this would point towards a limited impact from recent trade tensions.

Political Anxiety Likely to Keep GBP/NZD Exchange Rate Under Pressure

Once Theresa May announces a departure date, and sets the Conservative leadership contest officially underway, the GBP/NZD exchange rate could extend its slump.

With a more hard-line Brexiteer likely to take May’s place as Prime Minister markets remain wary of the rising potential for a no-deal Brexit.

However, with officials suggesting that a further extension of the current Brexit deadline could be in store in order to accommodate a leadership contest investors could find cause for confidence.

Any contraction in April’s UK retail sales data, though, could put an additional dampener on the GBP/NZD exchange rate ahead of the weekend.
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