Speculation of Softer Brexit Deal Inspired Bullish Run for GBP NZD Exchange Rate
The latest speculation over the UK’s future outside the EU saw the Pound New Zealand Dollar (GBP NZD) exchange rate rallying strongly. Comments from both sides of the Channel, from Brexit Secretary David Davis and Eurogroup President Jeroen Dijsselbloem, suggested that the UK may yet retain its current level of access to the single market. Naturally this offered encouragement to investors, as Derek Halpenny, European Head of GMR at MUFG, noted:
‘The comments to us suggest a further easing in fears over a ‘hard’ disruptive Brexit that should allow the recent out-performance for the pound to continue.’
Demand for the New Zealand Dollar (NZD), on the other hand, weakened in response to a disappointing third quarter terms of trade index. Falling short of forecast, the measure clocked in at -1.8% rather than 0.0% to suggest that conditions remained less-than-favourable. Although the New Zealand economy has demonstrated solid underlying fundamentals the mood towards the ‘Kiwi’ was still quick to deteriorate, particularly as general market risk appetite was more limited.
GBP NZD Exchange Rate Forecast: Resilient UK Services PMI Could Shore up Pound
Brexit-based volatility is likely to dominate the outlook of the Pound in the coming week, with the Supreme Court set to hear the government’s appeal over the need for a Parliamentary vote on triggering Article 50. Although the verdict will not come for some time this could nevertheless prompt fresh investor jitters over the future of the UK economy.
Also of interest to the GBP NZD exchange rate will be Monday’s Services PMI, which will offer fresh insight into the health of the UK’s main engine of economic activity. Forecasts point towards a modest uptick in activity on the month, something which could give the Pound another solid rallying point. However, if the measure proves disappointing then Sterling is likely to see a marked slump in demand.
While wider trends in market risk appetite are likely to remain the primary driving force behind the ‘Kiwi’ the latest GlobalDairyTrade auction may shift sentiment. If prices continue to demonstrate momentum then the appeal of the New Zealand Dollar could improve. Even so, the high market certainty of an imminent Federal Reserve interest rate hike is expected to maintain some downside pressure on the commodity-correlated ‘Kiwi’ in the medium term.
Current Interbank Exchange Rates
At the time of writing, the Pound New Zealand Dollar (GBP NZD) exchange rate was trending higher in the region of 1.77, while the New Zealand Dollar Pound (NZD GBP) exchange rate was slumped around 0.56.
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