Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls as MPs Return to Parliament

September 25, 2019 - Written by John Cameron

STORY LINK Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls as MPs Return to Parliament

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Edges Lower as Opposition Parties Call for Johnson’s Resignation

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped by around 0.5% with the pairing trading at around NZ$1.9662.

Sterling slumped against the ‘Kiwi’ on Wednesday as MPs prepared to return to parliament after the Supreme Court ruled the suspension unlawful.

Prime Minister Boris Johnson faces calls from opposition parties to resign as the court ruled against the government.

While Johnson said he ‘profoundly disagreed’ with the ruling, he said he would respect it.

The ruling provided the Pound with an upswing of support on Tuesday as investors saw this as a sign the probability of a no-deal Brexit has reduced.

However, the court ruling against the government has created further uncertainty causing investors to move away from Sterling.

Commenting on this, head of research at Henderson Rowe, Arthur Baluszynski noted:

‘With both the Tory and Labour electorate fragmented around the deal and no deal issue, the UK is running the risk of turning into an ‘Italy-like’ disaster.’

New Zealand Dollar (NZD) Jumps as RBNZ Leaves Interest Rates Unchanged

On Wednesday, the Reserve Bank of New Zealand (RBNZ) left its official cash rate at 1% as expected by markets.

In the minutes following the release the ‘Kiwi’ rallied as the bank stated there was not a significant change to its monetary policy outlook.

However, economists are still pricing in a rate cut for November commenting on this, ABS chief economist Nick Tuffley said:

‘[a lower OCR] remains very much on the cards.

‘We continue to expect a 25bp cut in November, which today’s statement and meeting summary leave the door open for.

‘But by itself the statement suggests that a November cut isn’t a dead certainty, even though we think it is the highly likely outcome.

‘Beyond November we still see the risks as being for further easing next year, given the risks remain stacked towards the RBNZ deciding even more stimulus is needed to meet its inflation and employment mandates.’

New Zealand Dollar (NZD) Rises as Trump Says He Will Not Accept a ‘Bad’ US-China Deal

The ‘Kiwi’ edged up against Sterling despite signs tensions between the United States and China are rising once again.

On Tuesday, Chinese State Councillor and Foreign Minister Wang Yi said Beijing expects the US to ‘remove all unreasonable restrictions’.

During a dinner, Wang stated:

‘China-US relations today have once again come to a cross roads.

‘While China opens wider to the US and the rest of the world, we expect the US to do the same to China and remove all unreasonable restrictions.

‘In a word, China’s efforts and achievements of reform and opening up in the past several decades have been widely recognized. They should not be deliberately ignored or denied.’

Meanwhile, US President Donald Trump delivered a speech, hitting out at China’s trade practices stating he would not accept a ‘bad deal’ in the current negotiations.

Although he stated he hopes the US and China will reach a deal, he stated he hoped they can ‘reach an agreement that will be beneficial for both countries’.

Commenting on this, chief strategist at Sumitomo Mitsui Bank, Daisuke Uno noted:

‘Trump’s speech was full of sensitive words for China – trade practices, currencies, freedom of religion and so on. It is not hard to imagine it will irritate China.

‘In the past China has reacted to US pressure on trade by bringing down the Yuan. It appears we are having that settings again.’

Pound New Zealand Dollar Outlook: Will Further Uncertainty Leave GBP Under Pressure?

Looking ahead, the Pound (GBP) could continue to slide against the New Zealand Dollar (NZD) as MPs return to parliament.

If opposition leaders press for the Prime Minister to resign, creating further political uncertainty in the run-up to the 31 October deadline, the Pound New Zealand Dollar (GBP/NZD) exchange rate is likely to slump.

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