The Pound has dropped by -0.3% against the New Zealand Dollar today, which puts the pairing near its worst exchange rate since mid-April. The future could bring high turbulence for both currencies, following the conclusion of the 2017 UK general election.
Long-term Pound Losses Predicted if New Government Aims for ‘Hard Brexit’
Whichever government takes control of the country on June 9th, they could have a strong impact on the Pound beyond the first few days in office. After the new (or old) government has composed itself, the first challenge will be to begin Brexit talks on June 19th.
After all the excitement and speculation about the election has faded away, the leading party’s stance on Brexit could cause significant losses or gains in the GBP NZD exchange rate.
During the election campaign, Prime Minister Theresa May has stated that the Conservatives are the best choice for Brexit, and that ‘no deal is better than a bad deal’.
While traders may be confident in the former point, the latter raises serious questions about future Tory goals regarding Brexit.
This mantra implies that a Conservative government would be quite willing to pull the UK out of the EU without a deal in the future, constituting an economically-turbulent ‘Hard Brexit’.
Offering a pessimistic forecast along these lines has been Finsbury Chairman Roland Rudd;
‘The Prime Minister [has] identified the European Union leaders as the enemy, and that they’ll see her as the enemy’.
This means that while the Pound may appreciate in the short-term on a majority Conservative election win, the longer-term could bring high uncertainty over the future of the UK-EU relationship.
Will New Zealand Dollar Drop on Struggle to Cope with Tourist Influx?
Future New Zealand Dollar movement could be determined by the nation’s preparedness for future tourist inflows.
Tourism is a key contributor to New Zealand’s economy, but an inability to cope with higher visitor numbers in the future could put pressure on a creaking tourism sector.
According to Simon Milne of the Auckland University of Technology’s Tourism Research Institute;
‘There’s so much more money being spent on marketing and promoting New Zealand. We need a commensurate increase [in infrastructure spending] and a big focus on managing tourism now, it’s not just about growing numbers’.
Commenting on the need to cater to a range of international visitors has been Tim Hunter, Chief Executive of cruise company Southern Discoveries;
‘We have to be careful as a country that we don’t have China become so dominant that it makes it less comfortable or enjoyable for other visitors’.
If future NZ spending plans do not focus sufficiently on tourism-related infrastructure, then the NZD could progressively slump against the Pound due to the negative connotations.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.7925 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5576.
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