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GBP to NZD Exchange Rate Tumbles as New Zealand Dollar Capitalises on Rival Weakness

November 4, 2019 - Written by Ben Hughes

While investors have had little fresh reason to move on the Pound so far this week, the British Pound to New Zealand Dollar (GBP/NZD) exchange rate has been falling as the New Zealand Dollar takes advantage of the market’s risk-sentiment and weakness in its rival, the Australian Dollar. This has left the New Zealand Dollar as one of the market’s best-performing major currencies today, continuing weeks of downside movement for GBP/NZD.

GBP/NZD has been falling since mid-October, and the pair continued to tumble last week. After opening last week at the level of 2.0204, GBP/NZD saw modest losses and closed the week near the level of 2.0125.

Since markets opened this week, GBP/NZD has continued to tumble. While GBP/NZD has rebounded slightly from this morning’s half month low of 2.0006, it is still trending below the week’s opening levels near the level of 2.0070.

GBP Exchange Rates Dampened by UK Election Uncertainty as UK Data Fails to Impress

Following weeks of highly volatile and sharp movement on Brexit developments, the Pound’s movement is a little lighter this week so far.

Investors are hesitant to move too much on the British currency amid uncertainty over the high number of potential outcomes to the upcoming UK General Election on the 12th of December.

While markets generally expect that the ruling Conservative Party will win the election and be able to push through its relatively soft Brexit plans, there is still anxiety over other possibilities, such as another hung parliament, or a strong performance from another party that could cause fresh Brexit uncertainty.

Due to the market focus on the upcoming election, Britain’s latest data has had no notable impact on the Pound despite it beating expectations.

Britain’s October construction PMI beat forecasts today, following a stronger than expected manufacturing PMI last week. Despite the data beating forecasts, it still showed that Britain’s construction sector was in contraction.

According to Jan Crosby, UK head of Infrastructure, Building and Construction at KPMG:

‘There had been pockets of optimism in the run up to October 31, largely because people were looking forward to some form of clarity around the future of the sector, but Brexit uncertainty has returned once more, coupled with a general election to boot’

NZD Exchange Rates Capitalising on Market’s Trade Deal Hopes

The New Zealand Dollar is a currency that is correlated to risk and trade, which means it has benefitted today from the latest hopes in US-China trade relations.

What’s more, the New Zealand Dollar is capitalising more than rivals, due to benefitting from weakness in those rivals as well.

The US Dollar (USD) continues to be weighed by Federal Reserve easing speculation, and the Australian Dollar (AUD), which typically benefits from US-China trade optimism, is being weakened by poor Australian retail sales results.

Despite a lack of fresh domestic news to support the New Zealand Dollar, analysts believe the trade developments are the main market mover today. According to Pierre Veyrett, Technical Analyst at ActivTrades:

‘Investors welcomed the significant recent progress on intellectual property theft issues, even though this topic hasn’t been entirely solved yet (some issues may slip to the phase 2 of the deal). A new venue is still to be agreed for a November US-China meeting with President Trump wanting the interim deal to be signed somewhere on US territory’

GBP/NZD Exchange Rate Forecast: New Zealand Job Market Report in Focus

While the New Zealand Dollar is being supported by US-China trade hopes today, this means the ‘Kiwi’ could quickly shed recent gains if US-China trade relations worsen again in the coming days.

The New Zealand Dollar is volatile and Reserve Bank of New Zealand (RBNZ) interest rate cut speculation continues to weigh on the currency’s outlook.

As a result, if upcoming New Zealand data beats expectations it could give the New Zealand Dollar some more solid support.

New Zealand’s key Q3 job market report will be published during Wednesday’s Asian session. If the data beats forecasts, it could soften RBNZ interest rate cut bets and boost the New Zealand Dollar.

It follows Britain’s October services PMI on Tuesday, which is unlikely to be hugely influential to the Pound to New Zealand Dollar exchange rate amid Pound investor focus on UK politics and Brexit.
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