Pound to New Zealand Dollar Exchange Rate Hits One-Month-Lows on ‘No Deal’ Brexit Fears
Despite the New Zealand Dollar’s (NZD) lack of strong support in recent weeks, the risky commodity-correlated currency has still climbed against the Pound (GBP) this week and the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate could keep falling too.
Last week saw GBP/NZD slip just slightly from 1.9305 to around 1.9284, and this week could see the pair slide at a similar pace unless upcoming New Zealand news influences exchange rates.
At the time of writing on Tuesday, GBP/NZD had fallen to a low of 1.9196 – the pair’s worst level since late June.
The pair remained near its lows as investors awaited key Reserve Bank of New Zealand (RBNZ) news and UK data later in the week, and various factors supported market demand for risky commodity-correlated currencies.
Meanwhile, Sterling has been kept under pressure as investors remain anxious about the seemingly rising possibility of a worst-case scenario ‘no deal’ Brexit becoming reality.
Pound (GBP) Exchange Rate Outlook Gloomy as ‘No Deal’ Brexit Fears Persist
While the Pound steadied slightly on Tuesday following its Monday selloff, it still remained weak against some rivals like the New Zealand Dollar as Brexit concerns persisted – and are unlikely to lighten any time soon.
As the Brexit date in March 2019 draws closer, markets are increasingly anxious about the possibility of UK-EU Brexit negotiations ending without any kind of deal at all.
Over the weekend, ‘no deal’ Brexit jitters worsened as UK Trade Secretary Liam Fox stated he believed the odds of no deal were as high as 60-40.
Sterling’s selloff cooled amid a lack of fresh downside pressure, but Brexit concerns are likely to prevent the British currency from recovering too. According to David Madden from CMC:
‘The more we hear the phrase ‘no-deal Brexit’, the more likely the Pound will be kept under the cosh,
The British side might give off the impression they would be content without a deal in order to force Brussels’s hand [so] the pound could be in for a rocky ride in the near-term.’
New Zealand Dollar (NZD) Exchange Rate Edges Higher with Risk-Sentiment
Investors found risky trade-correlated currencies like the New Zealand Dollar a little more appealing on Tuesday, as a lack of developments in US trade protectionism or the US-China trade spate left investors less hesitant to buy riskier assets.
Market demand for riskier currencies was supported by stronger commodity news since the end of last week, as well as stronger market performance in China.
As China is New Zealand’s biggest trade partner, this bolstered market demand for the New Zealand Dollar too.
On top of this, the New Zealand Dollar has benefitted from a stronger Australian Dollar (AUD) too, as the Reserve Bank of Australia (RBA) took a relatively upbeat tone on Australia’s economy despite ongoing US-China trade concerns.
Pound to New Zealand Dollar (GBP/NZD) Forecast: Reserve Bank of New Zealand (RBNZ) Decision in Focus
As the Reserve Bank of Australia (RBA) was less concerned about US-China trade tensions than feared during its August policy decision, investors are hoping the Reserve Bank of New Zealand (RBNZ) will remain cautiously optimistic too.
The RBNZ will hold its August policy decision during Thursday’s Asian session, and is not expected to make any changes to monetary policy.
Investors will be focusing on the tone the bank takes regarding New Zealand’s economic outlook, and the threat of a potential US-sparked trade war.
If the RBNZ, like the RBA, indicates that the domestic economy will continue to steadily improve over the coming year and keeps concerns about trade to a minimum, the New Zealand Dollar may continue to recover.
Other data that may influence the New Zealand Dollar outlook this week includes NZ business inflation expectations on Wednesday, and New Zealand’s July business PMI on Friday.
As for Sterling, it is unlikely to strengthen much unless ‘no deal’ Brexit fears lighten, even if Friday’s key UK Gross Domestic Product (GDP) data impresses – so this will keep pressure on the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook.