Pound to New Zealand Dollar Exchange Rate Jumps despite Modest GBP Movement
The Pound (GBP) rebounded from last week’s slump when markets opened today, but the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate’s gains were even more impressive due to the New Zealand Dollar’s (NZD) own weakness today.
Last week, a combination of fresh Brexit fears and rising trade hopes left GBP/NZD tumbling, and the pair fell from 1.9924 to 1.9509 throughout the week.
This left GBP/NZD well down from the previous week’s 2019 high of 1.9980, and essentially meant the pair had erased all of the gains it had seen since the middle of September.
Still, the Pound to New Zealand Dollar exchange rate is climbing today, as New Zealand Dollar investors react to today’s fall in New Zealand business confidence.
Pound (GBP) Exchange Rates Rebound Following Late-Week Slump
Despite a lack of notable fresh support since markets opened this week, the Pound (GBP) has been gaining against many major rival currencies today, especially against the weaker New Zealand Dollar.
This has been largely due to the British currency rebounding, following last week’s slump.
While the Pound briefly saw higher demand on news that UK Parliament would reconvene last week, market hopes and optimism around politics and Brexit quickly evaporated again due to clashes between MPs.
Sterling losses only accelerated towards the end of the week when Bank of England (BoE) policymaker Michael Saunders made dovish comments on monetary policy, suggesting that a rate cut was possible if Brexit uncertainties persisted too long.
New Zealand Dollar (NZD) Exchange Rates Hit by Weak Domestic Business Confidence
New Zealand’s September business confidence report from ANZ was published during today’s Asian session, and deepened slightly from -52.3 to -53.5.
While this was slightly better than the forecast contraction of -58.5 however, economists were highly disappointed with the news overall as it marked the worst level in a decade.
Some analysts, including Doug Steel from BNZ, said that it made the chances of another Reserve Bank of New Zealand (RBNZ) interest rate cut in November more likely. According to Steel, the data:
‘offered very little by way of redeeming features in the detail. Whether the negativity is feeding on itself or is being driven by new or deeper fundamental concerns is difficult to tell, but there is no doubt that businesses are pessimistic about the economic outlook’
Due to business confidence concerns, the New Zealand Dollar was unable to hold its ground or benefit from market hopes for improving US-China trade relations. NZD weakness was the primary cause of GBP/NZD gains today.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Await Another Week of Brexit Chaos
This week’s upcoming UK and New Zealand economic calendars will again be fairly quiet, with the only significant data of note after today being Markit’s September UK PMI results.
Unless the upcoming data is surprising enough to influence the market’s outlook for Britain’s economy and Bank of England (BoE) monetary policy though, global factors and politics are likely to drive the Pound to New Zealand Dollar (GBP/NZD) exchange rate.
With just about a month to go now until the current Brexit date of the 31st of October, the Pound’s movement could be dominated by Brexit developments this week and over the coming months.
UK MPs are likely to continue to explore ways to ensure that a no-deal Brexit can be blocked, but the Boris Johnson-led government has indicated it could still head for a no-deal Brexit. If no-deal Brexit fears persist, the Pound will weaken.
The New Zealand Dollar, on the other hand, will be driven by continued US-China trade negotiations.
If the US and China appear closer to reaching a trade deal, the Pound to New Zealand Dollar (GBP/NZD) exchange rate could shed some of today’s gains as NZD would more easily climb.