After an unusual turn of events, the Pound has traded down against the New Zealand Dollar.
The pairing originally rose to a rate of 1.9443 on Monday, but has since fallen to 1.9348.
This devaluation has been caused by an expansion of the UK borrowing deficit, as well as surprising New Zealand Dollar resilience.
The NZD has easily weathered the news that global dairy prices have dropped by -3.4%, although some economists had forecast an immediate NZD drop on such news.
(Last updated November 21st, 2017)
The Pound has furthered its gains against the New Zealand Dollar on Monday afternoon, rising from an earlier exchange rate of 1.9396 to trade higher at 1.9443.
These additional gains come after growing speculation that the UK government will offer more parting cash to the European Union.
The apparent breakthrough is the news that as well as ‘Remain’ ministers backing the proposal, high-profile ‘Leave’-affiliated figures might also support it.
There are suggestions that individuals like Boris Johnson and Michael Gove are on board with paying more to the EU, under certain conditions.
(First published November 20th, 2017)
The New Zealand Dollar has been stable against other currency peers, as traders look to the possible outcome of multinational trade talks.
Pound to New Zealand Dollar Forecast: GBP could Rally on Brexit Breakthrough
The latest Pound gains have come from Brexit news. Specifically, GBP has appreciated because of hopes that there could be a change of tact in negotiations.
Chancellor Philip Hammond has implied that the UK government could offer more money to the EU as part of its ‘divorce bill’, as a way of progressing in talks.
Negotiations have previously stalled because of a lack of progress on key issues, including the Irish border and rights of EU citizens besides the matter of an exit payment.
Commenting on the latest GBP rise was Stephen Macklow-Smith of JPMorgan Asset Management;
‘I think for the moment people are still fixated on progress in negotiations between the UK and the EU…the [Pound] reacts to that most quickly.
There is scope for Sterling to bounce if we get a fairly benign deal, and that would then translate to some rotation within the market, because when Sterling weakens, overseas earners do well’.
In essence, if the UK does offer more money to the EU and gets a better proposed Brexit deal because of it, the Pound could rise further.
Will New Zealand Dollar Decline on Future TPP Talks?
Apart from direct economic news, the New Zealand Dollar could also be influenced by trade talks in the future.
The Trans-Pacific Partnership (TPP) was initially thought to have been sunk when Donald Trump took office in January 2017 and withdrew the US from the deal.
Since then, however, trade officials for the remaining nations of the deal (including New Zealand) have been hard at work in trying to salvage a workable arrangement.
With a Labour-NZ First Government now leading New Zealand, there are fresh hopes that the deal could ultimately go ahead.
The main obstacle in the matter is the NZ Green Party, which currently offers support to the Labour Party as part of the coalition arrangement.
While there are still hopes that Labour will bring partners NZ First onto the same page regarding TPP, Green Trade Spokeswoman Golriz Ghahraman has warned;
‘We support fair trade that brings real benefit to all New Zealanders – not trade deals that put our rights and our Government’s ability to legislate to protect our people and our environment at risk.
[On this matter, we] respectfully disagree [with Labour]’.
If it looks like the TPP deal will finally be a reality in the coming months, the New Zealand Dollar could rally against the Pound.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.9396 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5150.