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Pound New Zealand Dollar (GBP/NZD) Exchange Rate Slumps despite Overly Dovish RBNZ

November 19, 2019 - Written by John Cameron

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Falls despite Dovish Central Banks

The Pound Sterling New Zealand Dollar (GBP/NZD) exchange rate slumped on Tuesday, leaving the pairing trading at around NZ$2.0174.

Comments from the Reserve Bank of New Zealand (RBNZ) and its Aussie counterpart, the Reserve Bank of Australia (RBA) suggested they are more dovish than previously thought.

While RBNZ assistant governor, Christian Hawkesby’s comments at a UBS Australia conference were nothing new, he reiterated that the bank is prepared to cut rates once again if needed.

Commenting on this, Kiwibank dealer, Mike Shirley said:

‘It just came out of nowhere. They keep reinforcing this point, that they’re prepared to do more.’

Added to this, sentiment was rocked by the release of the RBA’s meeting minutes which revealed that much like New Zealand’s central bank, policymakers were close to cutting rates.

This morning’s RBA minutes showed that a cut was a close call, and Gareth Aird, CBA economist noted:

‘It appears that the ‘on hold’ decision was not made lightly.

‘We view this new information and its inclusion in today’s minutes as a dovish tilt. The small fall in the Australian dollar at 11.30am today implies that market sentiment agrees that this is a dovish development.’

Sterling (GBP) Slides Ahead of Live Election Debate

The Pound fell against the ‘Kiwi’ ahead of Tuesday evening’s live head-to-head ITV debate between Prime Minister Boris Johnson and Labour Leader, Jeremy Corbyn.

Following the debate, YouGov is expected to release a poll that could buoy GBP if it shows the Conservatives continue to push ahead of Labour in the polls.

However, Sterling slumped despite the upswing of support received on Monday after Johnson’s announcement.

The Prime Minister said that all Conservative Party candidates standing in the December election supported his Brexit deal which boosted the chances of it being passed through parliament.

This means the chance of the UK leaving the bloc with a deal by the end of January increased, although this did little to buoy GBP on Tuesday.

New Zealand Dollar (NZD) Rallies as US-China Negotiations Remain in Focus

The New Zealand Dollar edged up against the Pound as trade tensions between the United States and China remained in focus.

The ‘Kiwi’ received an upswing of support as expectations the US and China would secure a ‘phase one’ trade deal increased, buoying risk appetite.

However, gains were limited as reports revealed Chinese officials were concerned by comments from US President Donald Trump.

Trump stated that there was no agreement on phasing out existing tariffs, going against previous statements from Beijing.

Commenting on trade negotiations, Vishnu Varathan, head of economics and strategy at Mizuho Bank’ Asia Treasury Department stated:

‘There are some lingering doubts over whether a phase one deal can be struck. The suspicion is that there’s a lot more wrinkles to iron out than initially thought.’

Pound New Zealand Dollar Outlook: Will US-China Pessimism Weigh on NZD?

Looking ahead, Sterling (GBP) is likely to rise against the New Zealand Dollar (NZD) following tonight’s live head-to-head election debate.

If it is revealed the Conservatives have gained further support after the debate between Boris Johnson and Jeremy Corbyn, the Pound will rise.

Meanwhile, further developments in US-China trade negotiations are likely to cause movement of ‘Kiwi’ exchange rates.

If tensions increase and reports suggest a ‘phase one’ deal is further away than expected, it is likely the Pound New Zealand Dollar (GBP/NZD) exchange rate will edge higher.

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