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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Extends Slide amid No-Deal Brexit Fears

July 17, 2019 - Written by Frank Davies

Rising Risk of No-Deal Brexit Drives Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Lower

As market anxiety over the prospect of a potential no-deal Brexit intensified the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate remained under pressure.

With both candidates in the Conservative leadership contest pledging to drop the Irish backstop from the EU withdrawal agreement the risk of the UK crashing out of the EU without a deal increased.

Markets are increasingly fearful of the odds of Parliament being prorogued in anticipation of a no-deal Brexit on the 31st October, leaving the Pound biased to the downside.

Although the headline UK consumer price index held steady at 2.0% in June this was not enough to offer GBP exchange rates a rallying point on Wednesday.

New Zealand Dollar (NZD) on Solid Footing after Inflation Uptick

In the wake of the solid second quarter New Zealand consumer price index data the mood towards the New Zealand Dollar has remained positive, meanwhile.

As inflationary pressure picked up from 1.5% to 1.7% on the year this appeared to reduce the likelihood of the Reserve Bank of New Zealand (RBNZ) cutting interest rates in the near future.

This helped to keep NZD exchange rates on a stronger footing even as positive US data weighed on the general sense of market risk appetite.

However, with the Federal Reserve still looking set to cut interest rates in the near future the downside potential of the New Zealand Dollar proved limited.

Resilient UK Retail Sales Forecast to Shore up GBP/NZD Exchange Rate

Demand for the Pound could pick back up on Thursday if June’s UK retail sales data shows signs of resilience among consumers.

If sales excluding auto fuel accelerate on the year as forecast this may encourage hopes that Brexit-based anxiety has not constrained consumer spending.

Even so, with sales looking set to remain in a state of contraction on the month any positive impact from the data could prove limited.

Political developments are expected to remain the primary driving force of GBP exchange rate movement ahead of the weekend, though, as the Conservative leadership contest draws to a close.

Lack of Fresh Data Set to Limit New Zealand Dollar (NZD) Support

With no fresh New Zealand economic data set for release during the remainder of the week support for the New Zealand Dollar could fade.

Any easing in market risk appetite may drag NZD exchange rates down in the short term as markets continue to speculate over the odds of further Federal Reserve monetary loosening.

Looking further ahead, the New Zealand Dollar may fall out of favour with investors on the back of June’s set of trade data next week.

With the headline trade balance forecast to slide into a state of contraction confidence in the economic outlook looks set to diminish, to the benefit of the GBP/NZD exchange rate.
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