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Pound to New Zealand Dollar Exchange Rate Flounders as Brexit Fear Returns to Outlook

Pound to New Zealand Dollar Exchange Rate Sheds Last Week’s Gains and Falls Limp

UK markets closed last week amid broad optimism that the new UK Conservative majority government would be able to push a softer Brexit, but reality hit the Pound (GBP) yesterday and left the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook much lower.

Last week saw GBP/NZD climb from the level of 2.0000 to 2.0215 throughout the week, even briefly touching on a 2019 high of 2.0403 on Thursday night.

However, since markets opened on Monday GBP/NZD has quickly shed those gains and fallen even lower. At the time of writing on Wednesday, GBP/NZD is trending near a weekly low of 1.9944.

The Pound outlook may be in for further bearishness if the UK government doubles down on its seemingly hard Brexit stance.

Meanwhile, the New Zealand Dollar (NZD) outlook could be considerably influenced by tomorrow’s anticipated New Zealand growth rate report.

Pound (GBP) Exchange Rates Unappealing after Hard Brexit Fears Return

Investors piled into the Pound at the end of last week. It came amid hopes that Britain’s new Conservative majority government would have the space to push through a relatively soft Brexit.

In fact, hopes for a softer Brexit had been among the primary causes of the Pound’s strong performance in recent weeks.

The latest Brexit developments, less than a week after the election result, have caused fresh panic in British markets however.

UK Prime Minister Boris Johnson has indicated that he will attempt to rule out an extension to the Brexit transition period. This would force the transition period to end at the end of 2020, come-what-may.

The news led to a surge in fears that a hard Brexit was still a high possibility and that another year of Brexit uncertainty was inevitable. According to Chris Weston, Head of Research at Pepperstone:

‘With the level of frothiness in positioning, I think people had priced in very smooth sailing throughout 2020,

This has given us a snap back to reality. If you thought Brexit was solved, and we’re going to see very, very smooth times ahead, then that’s not quite going to be the case.’

New Zealand Dollar (NZD) Exchange Rates Steady Ahead of Key New Zealand Growth Report

Since the end of last week, the relatively risky trade-correlated New Zealand Dollar has been supported by higher market risk and trade-sentiment.

The currency’s losses against a strong Pound were limited and its recovery against a weak Pound yesterday was boosted, thanks to market optimism around US-China trade relations.

While the New Zealand Dollar’s strength was slightly limited yesterday, amid market concerns about a more dovish than expected Reserve Bank of Australia (RBA), the New Zealand Dollar is still being supported by strength in recent New Zealand data.

This week’s New Zealand confidence data was better than forecast, and investors are now highly anticipating tomorrow’s key New Zealand growth rate report.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Awaits Brexit and New Zealand Growth News

Pound trade continues to be heavily weighed by market fears of a 2020 filled with Brexit uncertainties. For now though, investors are eagerly anticipating further details on the government’s plans.

The government’s Brexit plans are expected to be pushed through UK Parliament over the coming week, before Christmas. This is likely to take market focus over upcoming UK data.

Tomorrow will see the publication of retail sales results and growth rate stats will follow on Friday.

Thursday will also see the Bank of England (BoE) hold its December policy decision. If the bank continues to focus on Brexit uncertainty despite the new Conservative majority government, the Pound could see further pressure.

Upcoming New Zealand data could be highly influential for the New Zealand Dollar outlook, however.

New Zealand’s Q3 growth rate results could influence Reserve Bank of New Zealand (RBNZ) speculation and the Pound to New Zealand Dollar (GBP/NZD) exchange rate tomorrow if it surprises markets.