The Pound has been thrown into turmoil against the New Zealand Dollar following a hung parliament outcome to the UK general election. This situation could be resolved in the near-term, while the Pound may find longer-term gains due to the new government’s composition.
Pound Outlook: Is a GBP-Damaging Hard Brexit Off the Table?
Some spectators dubbed the June election as the ‘Brexit vote’ and if this is accurate, then voters have not solidly backed the Conservative outlook.
The Conservative manifesto asserted that ‘no deal is better than a bad deal’, but the slump in Tory support suggests that a deal may have to be taken, regardless of how ‘bad’ it is.
Commenting on the election result was former Conservative Chancellor George Osborne, who predicted;
‘I don’t think “Hard Brexit” has a majority in the House of Commons anymore and that will mean a big rethink’.
According to Independent Political Editor Andrew Grice, this means that;
‘It could now be a very different Brexit, a much softer version than the one [Theresa] May wanted. Membership of the single market and customs union, ruled out by May, are now back on the agenda. Instead, Parliament will now play a more important role. Pro-European Tory MPs may well link up with like-minded MPs in other parties to push for a soft Brexit. Some MPs and peers will argue that May’s plan for Hard Brexit has been rejected.
As well as ‘Soft Brexit’ being a significant compromise on Conservative plans, it could also raise Pound demand considerably.
If the outcome of this historic election does force the government to temper its approach to Brexit then the Pound could rally. This is because any deal is considered as better than a bad deal, and keeping links with the EU after exiting is also seen favourably by economists.
New Zealand Dollar Predicted to Slump if Dairy Price Rise Ends
The New Zealand Dollar has gained against the Pound on the hung parliament news, but could decline in the future on dairy price news.
The Global Dairy Trade price index, which measures global changes in dairy prices, has consistently shown growth over the last six sessions. This has pushed up NZD demand, but could also be setting the New Zealand Dollar up for a crash.
If dairy prices suddenly slump in the future then the NZD could decline sharply, as it would indicate a worsening situation for the country’s exporters.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.7712 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5643.
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