Pound to New Zealand Dollar Exchange Rates Higher on Brexit Hopes
Despite mixed market demand for riskier trade-correlated currencies this week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate ultimately looked to end the week much higher as risk-sentiment dulled on Friday.
After opening the week at the level of 1.8621, GBP/NZD spent most of the week testing higher levels. On Thursday, GBP/NZD surged and touched on a weekly high of 1.8961.
At the time of writing, GBP/NZD was trending near the level of 1.8911 and was on track to have sustained around 3 cents of gains throughout the week.
The Pound’s (GBP) outlook remains shrouded in uncertainties, due to a perceived lack of support for UK Prime Minister Theresa May’s Brexit plan among UK MPs.
The New Zealand Dollar (NZD), on the other hand, has been unappealing due to worsening global trade jitters, as well as rising concerns that global growth could begin to weaken over the next year.
Pound (GBP) Exchange Rates Struggle to Hold Best Levels as Brexit Fears Persist
On Thursday, investors bought the Pound in reaction to a political declaration from the UK and EU regarding the future relations of nations following Brexit.
The news was taken to mean that the UK-EU Brexit deal has largely been finalised, and that the summit would see the deal smoothly confirmed. Investors became more hopeful that this meant a ‘no-deal Brexit’ could be avoided.
However, the Pound’s gains were ultimately limited and the currency struggled to keep climbing on Friday, as market focus returned to uncertainty in UK politics.
Many UK politicians, including those in UK Prime Minister Theresa May’s Conservative Party and its allies, have indicated they will not support the Brexit plan.
This has kept investors anxious that the Brexit bill could be blocked by UK Parliament and lead to a worst-case scenario ‘no-deal Brexit’. The political declaration did little to change this, according to David de Garish from NAB:
‘A full read through of the text suggests a lot of important details need to be clarified. ..this document is not convincing the market that it will pass through Parliament,’
New Zealand Dollar (NZD) Exchange Rate Sold on US-China Trade Jitters
Earlier in the week, investors found risky trade-correlated currencies like the New Zealand Dollar more appealing as markets speculated the Federal Reserve’s US interest rate hike cycle was coming to an end.
This left investors more willing to take risks and sell safe haven currencies like the US Dollar (USD).
However, risk-sentiment has fluctuated since then, as other global factors keep investors hesitant to buy riskier assets too much.
Tension between the US and China worsened this week, despite hopes for the nations to see more positive trade talks.
US officials have said they will not go back on controversial trade tariffs on Chinese goods, until China changes its ways.
On top of this, the risky New Zealand Dollar is being pressured by analyst concerns that global growth could slow in 2019 and 2020.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Anticipate Brexit Developments
The Pound to New Zealand Dollar (GBP/NZD) exchange rate may struggle to keep advancing next week, as investors will likely cool from UK-EU Brexit deal excitement and attention will turn towards domestic developments.
Markets are highly concerned that there will not be enough domestic support for UK Prime Minister Theresa May’s Brexit plan, and that the bill could be blocked when it comes to Parliament vote in December.
As a result, investors will be keeping a close eye on the popularity of Prime Minister May’s Brexit plans, particularly within her Conservative Party and allies such as Northern Ireland’s Democratic Unionist Party (DUP).
If domestic support is perceived to weaken even further, ‘no-deal Brexit’ fears will rise and the Pound will slump.
The New Zealand Dollar, on the other hand, will continue to be influenced by shifts in global risk-sentiment.
A G20 meeting in Argentina will be held next week, and US President Donald Trump is expected to meet China President Xi Jinping. This may influence US-China trade jitters.
Some notable data, including New Zealand trade balance and UK consumer confidence, will be published throughout the next week and may also influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook if they surprise investors.