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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Steady, US Downplays November US-China Trade Deal

October 23, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Rangebound, US-China Trade Uncertainty Returns

The Pound New Zealand Dollar (GBP/NZD) exchange rate held steady today, with the pairing currently trading around NZ$2.011 after the US Commerce Chief, Wilbur Ross, downplayed the possibility of a November US-China trade deal and dampened risk appetite in the ‘Kiwi’.

Mr Ross commented:

‘It has to be the right deal, and it doesn’t have to be in November. It’s more critical that it be a proper deal that exactly when it occurs. The key thing is to get everything right that we do sign. That’s the important element. That’s what [US President Donald Trump] is wedded to… Whether it’s this day or that day might be interesting to the media, but it isn’t the real game.’

New Zealand markets have become increasingly jittery on the possibility that US-China trade talks could spill over into a ‘second phase’ of negotiations.

Xiaojia Zhi and Helen Qiao, Analysts at the Bank of America Merril Lynch, commented:

‘Despite the rising expectation of a ‘phase-one’ deal between the US and China in November, we think growth headwinds will likely persist in the near term, given suppressed trade growth and weak domestic [capital expenditure] demand.’

GBP/NZD Exchange Rate Holds Steady as UK Markets Await EU Brexit Extension

The Pound failed to gain on the New Zealand Dollar today after Prime Minister Boris Johnson and Labour leader Jeremy Corbyn failed to agree on a timetable for the ‘paused’ Brexit Withdrawal Agreement Bill.

As a result, UK markets are remaining cautious today as it is now down to the European Union to present an extension to the Brexit deadline.

However, relief arrived in the form of Leo Varadkar, Ireland’s Prime Minister, after he said that he would be willing to back the European Council President Donald Tusk’s proposal until January 31 2020.

Donald Tusk tweeted:

‘Following [Boris Johnson’s] decision to pause the process of ratification of the withdrawal agreement, and in order to avoid a no-deal Brexit, I will recommend the EU27 accept the UK request for an extension. For this, I will propose a written procedure.’

GBN/NZD Outlook: Could Sterling Rise on UK-EU Brexit Delay?

Sterling traders will be awaiting tomorrow’s release of September’s UK BBA mortgage approvals figure. Any signs of improvement could bolster optimism in the UK economy and provide some uplift for the Pound.

Brexit developments will continue to be the main driver of the GBP/NZD exchange rate for the next couple of days. However, if the EU grants a long extension for Brexit, we could see Sterling rise as an October no-deal is effectively removed.

New Zealand Dollar investors will be paying close attention to US-China trade developments. If the world’s two largest economies show any signs of compromising on a trade deal in November, we could see the ‘Kiwi’ rise on restored market risk appetite.

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