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Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Plummets as Brexit No-Deal Odds Rise

December 10, 2020 - Written by John Cameron

GBP/NZD Exchange Rate Sinks as Brexit Talks Fail to Progress

The Pound to New Zealand Dollar (GBP/NZD) exchange rate plummeted by -1.3% today, with the pairing currently fluctuating around NZ$1.880.

The Pound (GBP) struggled today after last night’s crunch talks between Prime Minister Boris Johnson and the European Commission’s President, Ursula von der Leyen, failed to yield a consensus on a post-Brexit trade agreement.

Von der Leyen told reporters:

‘I had a very long conversation yesterday night with Prime Minister Boris Johnson. It was a good conversation. But it is difficult.

‘We are willing to grant access to the single market to our British friends. It’s the biggest largest single market in the world. But the conditions have to be fair. They have to be fair for our workers and for our companies, and this fine balance of fairness has not been achieved so far.’

Meanwhile, the two sides have agreed to take a more definitive decision on Sunday, when they are expected to formulate either a trade agreement or not.

Number 10 has also refused to commit to agreeing with the European Union’s no-deal contingency plan, sparking concerns that the UK could be headed for a no-deal situation on January 1st.

New Zealand Dollar (NZD) Rises as Risk-On Market Mood Benefits ‘Kiwi’

The New Zealand Dollar (NZD) has benefited from risk-on market mood today, with Covid-19 vaccine rollouts in the UK – as well as EU and US expected to follow with a rollout – has boosted confidence in the global economy.

Consequently, demand for riskier assets such as the ‘Kiwi’ has risen this week.

According to analysts:

‘[The New Zealand Dollar] has benefited from rising risk appetite as the Asia-Pacific region on the whole has weathered the pandemic better than the West, and moreover, coronavirus vaccine approval and deployment has begun across developed Western economies.’

In New Zealand economic news, this evening will see the release of the latest Business NZ PMI for November.

Any improvement in the outlook for New Zealand’s domestic economy would be NZD-positive.

GBP/NZD Forecast: Brexit Developments in Focus as Deadline Draws Closer

Brexit will continue to determine the direction of the GBP/NZD exchange rate this week.

As a result, we could see Sterling continue to struggle if the UK and EU fail to make any notable progress towards a post-Brexit trade agreement.

Conversely, if negotiations between to two sides show indications of forming a consensus on a free trade deal, we could see the Pound head higher.

However, the New Zealand Dollar will likely perform strongly throughout the rest of this week, with risk-on market mood being boosted by the rollouts of Covid-19 vaccines.

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