The outlook for the GBP NZD exchange rate is looking increasingly positive today, with markets hopeful that sufficient agreement will soon be had on the future of the Irish border and that the latest ‘divorce settlement’ figure is being accepted.
End to Irish Border Impasse Near? GBP NZD Exchange Rate Continues Climb
UK and EU negotiators are reportedly more optimistic that an agreement will soon be had on the future of the Irish border, with a ‘substantial breakthrough’ in negotiations allegedly having taken place.
UK Prime Minister Theresa May is expected to provide clarity on Monday on three controversial aspects of talks; the first being the Brexit ‘settlement’, the second being the Irish border and the third being the rights of EU citizens in the years ahead.
If sufficient progress is demonstrated in all three regards to European Commission President Jean-Claude Juncker on Monday then talks may be given the green light to progress.
Sources have also reported that Brussels’ reaction to the latest divorce bill sum has been more positive, with many asserting yesterday that both parties are now in the midst of constructing a ‘joint paper’ to formalise a sum.
Nonetheless, whilst the EU insists that the fee is not in exchange for an agreeable trade deal, May has countered, stating:
‘No we are still in negotiations with the European Union; as the EU themselves have said, nothing is agreed until everything is agreed’.
Similarly, Lizz Truss, Treasury Minister in the UK, has claimed that the deal is definitely ‘contingent on getting a suitable outcome from those negotiations (referring to trade talks)’.
In this respect there is seemingly still some way to go, even if the markets are optimistic.
New Zealand Business Confidence Tumbles, NZD Exchange Rate Slides
Confidence in New Zealand Businesses plummeted to an 8 year-low in November, according to data from the Australia and New Zealand Banking group (ANZ).
The figures demonstrated a drop to -39.3, down from the previous period’s -10.1 and marked the lowest reading since March of 2009.
All major sub-indices excluding construction fell.
The primary reason for this drop remains uncertainty around the new Labour led coalition leadership, with many businesses apprehensive about a massive proposed cut to immigration and a softer housing market.
ANZ Chief Economist Sharon Zollner shared this sentiment:
‘Uncertainty around changing government policy, a softer housing market, and difficulty getting credit are likely culprits. The economy is at a delicate juncture as migration, construction and housing run out of steam as growth drivers. Commodity prices are strong and a fiscal boost will come through in time, but at such times of transition, sentiment is more vulnerable’.
The outlook for the ‘Kiwi’ became increasingly negative as a result, with a separate gauge of expectations for activity also falling to an eight-year low of 6.5, down from 22.2.
Key Brexit Dates Ahead for the Pound (GBP)
The next two weeks leading up to the mid-December summit are liable to cause some volatility for GBP NZD, here are some to keep an eye on:
1st of December – Diplomats from the EU are due to meet to assess Britain’s financial settlement proposal, progress on the Irish border and indeed citizens’ rights. Intensive talks will likely continue into the weekend.
4th of December – Theresa May is expected to head to Brussels for a meal with Jean-Claude Juncker. This is regarded by many to be ‘crunch time’ as it were, with the Prime Minister expected to argue London’s case on proposals to solve issues like the Irish border.
6th of December – Ambassadors from the EU will once again resume preparations for the December summit, regardless of the state of article 50 talks. All conclusions to be announced at the end of the summit will be drafted in preparation.
14-15th December – EU leaders will meet in Brussels for the highly anticipated summit. Much of what will be announced will have already been drafted. The verdict on whether sufficient progress has been made will be announced and conclusions will be drawn. May will be informed whether trade and transition talks can start.
The summit will likely cause the most volatility for the Pound, as a failure to achieve sufficient progress will delay trade talks even longer and risk a ‘cliff-edge’ Brexit. In this situation, the Pound will likely tumble.
If sufficient progress is made, however, then market demand for the Pound will return in kind.
Comments are closed.