- Postponed Article 50 Stokes Uncertainty and Drags Pound New Zealand Exchange Rate Lower– Cameron has stated that the official process will not begin until a new Tory party leader is found.
- UK Political Party Infighting – Both Labour and the Conservatives are struggling for leadership when the country needs it most.
- Stronger than Forecast Ecostats Give NZD a Boost – Healthy trade balance points towards domestic strength for New Zealand.
- Pound up in the Air as UK Continues to Lack Concrete Post-Brexit Plan
The Pound New Zealand Dollar exchange rate has depreciated roughly four cents since the start of the week, following on from last week’s monumental movement spurred by the UK voting to exit the European Union.
GBP/NZD has traded fairly narrowly so far today. Briefly scraping the 2.06 mark on the night the polls closed, the referendum results saw the Pound New Zealand Dollar exchange rate plummet and has dropped further as this week has went on.
Pound (GBP) Struggles on World Stage as UK Lawmakers Grapple with Brexit Results
Tarnished by last week’s results, the Pound has seen its worst days since the 1980s as the fallout from the Brexit referendum drives the markets.
Down 10% across the board, Sterling experienced an unprecedented single-day drop following the announcement on Friday morning that the UK will be leaving the European Union.
Domestic affairs are doing nothing to help the Pound’s woes as both the Labour and Tory parties are experiencing some sort of interregnum. David Cameron stepped down following the results and announced that there should be a new party leader within two months in a surprisingly heartfelt speech outside number 10.
Jeremy Corbyn has had to tackle a shadow cabinet coup as more than two thirds of his ministers step down. 21 out of 30 shadow cabinet ministers have given their letters of resignation, citing Corbyn’s lack of strong leadership and a limp ‘Remain’ campaign as the main reasons for their departure.
So now both mainstream political parties are struggling for leadership during what is possibly the most tumultuous time the UK has ever had to weather. The UK’s EU commissioner Lord Hill has also resigned, perhaps somewhat prematurely as we shall still be dealing with the EU extensively until the end of the Article 50 negotiations.
New Zealand Dollar (NZD) Fails to Find Support in Decidedly Risk-Off Market
The ‘Kiwi’ has felt significant downward pressure, same as any other risk-correlated currency, since the announcement on Friday that the UK will be exiting the European Union.
The immense feeling of uncertainty permeating the markets due to recent events have seen commodity-correlated, riskier currencies losing support the world over as investors flock towards the sturdier safe-havens of the US Dollar and Japanese Yen. This can be seen in the massive drop for the Pound New Zealand exchange rate immediately following the referendum results. The shift towards risk off sentiment within the market has seen both the US Dollar and Japanese Yen rally spectacularly across the board.
With the unknown blocking any particularly insightful predictions, the New Zealand Dollar is likely to remain weak until global risk aversion dies down, but it will be up to UK and EU policymakers to temper sentiment.
Daniel Been, head of Foreign Exchange research at ANZ, had this to say regarding the antipodean economies coping with the Brexit:
‘Do we think of them as economies that are still operating standard policy, that have relatively good nominal growth and that are open for trade and welcome globalisation? Or, will these positives ultimately be outweighed by the fact that they are both small open economies dependent on global trade and finance which cannot be wholly insulated from global shocks?’
Pound New Zealand Dollar Exchange Rate Forecast: Uncertainty Continues to Cloud Outlook
The Pound’s future sits decidedly in the hands of a small group of politicians and policymakers who are gearing up to set out a plan for how the UK will cope in a post-Brexit world.
EU lawmakers have made it clear than no ‘informal’ negotiations are to be had, instead insisting on the enactment of Article 50 before any talks can begin. German Chancellor Angela Merkel eluded to this in a speech she gave today as well as mentioning that the UK will not likely have access to the free market without accepting free movement of labour.
This week’s ecostats are irrelevant to the Pound and incredibly thin on the ground for the New Zealand Dollar.
It shall be sentiment that continues to reign supreme in regards to market impact. If risk aversion manages to relent somewhat then the ‘Kiwi’ could enjoy an increase in support. The Pound is unlikely to gain any strength until after lawmakers can put forward some sort of plan of action for the UK as right now there is painfully little in the way of forward planning.
The Pound New Zealand Dollar Exchange rate is likely to see further loses until Sterling can start its recovery in a slightly less uncertain environment.
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