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Pound New Zealand (GBP/NZD) Exchange Rate Sinks as UK-EU Tensions Mount on No-Deal Brexit Fears

July 29, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Falls as UK Government Works on ‘Assumption’ of No-Deal

The Pound New Zealand (GBP/NZD) exchange rate fell by -0.6% today, leaving the pairing trading around NZ$1.8511.

The Pound (GBP) sank against the New Zealand Dollar (NZD) as no-deal Brexit fears rose following comments from Michael Gove, the former Environment Secretary, who said that the UK Government is now ‘working on the assumption’ of a disorderly exit from the European Union.

Mr Gove said:

‘The EU’s leaders have, so far, said they will not change their approach – it’s the unreformed withdrawal agreement, take it or leave it. We still hope they will change their minds, but we must operate on the assumption that they will not.’

These comments came after Brussels said last week that it would be unwilling to re-open negotiations on the current withdrawal agreement after Prime Minister Boris Johnson demanded the removal of the Irish backstop.

Mr Johnson, however, has however pledged to ‘hold out a hand’ and ‘go the extra thousand miles’ to secure a new deal with the European Union.

He said:

‘My approach is to be very outward-going, I don't want the UK to be aloof or hanging back… and what we want to do is make it absolutely clear that the backstop is no good, it's dead, it's got to go.’

Sterling traders are remaining cautious however, as the EU has persistently rejected this condition.

NZD/GBP Exchange Rate Improves as US-China Trade Talks Set to Renew

The New Zealand Dollar (NZD) has benefited from news that US-China trade talks will resume in Shanghai this week.

As New Zealand’s economy relies heavily trade with China, any signs of easing tensions between the two superpowers benefits the risk-averse ‘Kiwi’.

Analysts are remaining cautious however, with Julian Evans-Prichard of Capital Economics saying:

‘The same issues that caused the talks to break down are still there. Neither side seems any closer to offering major concessions. It’s very hard to see how they can reach a deal this time if they were unable to do that in March.’

The ‘Kiwi’ could rise higher against Sterling today if the NZ building permits figures for June improve.

GBP/NZD Outlook: Sterling Could Fall Further on No-Deal Fears

New Zealand Dollar traders will be looking ahead to Wednesday’s ANZ business confidence figures for July, which are expected to improve slightly from -38.1 to -34.9.

Sterling traders, meanwhile, will be looking ahead to Wednesday’s printing of the GfK consumer confidence figures for July.

Brexit, however, will remain in focus for UK markets over the next few days.

The GBP/NZD exchange rate could sink further if tensions between the UK and EU increase as Boris Johnson continues to remain firm on the issue of no Irish backstop – a condition on which with EU is also unwilling to budge.

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