The Pound to New Zealand Dollar (GBP/NZD) slumped this morning as hopes of a post-Brexit trade deal appear to be disappearing, with the pair currently trading around $1.875.
Sterling made large losses as Prime Minister Boris Johnson’s last ditch attempt to break the Brexit deadlock has so far been unsuccessful.
Boris Johnson shared a three-hour dinner with European Commission President Ursula von der Leyen on Wednesday night, though the two sides agreed that there are still ‘major differences between the two sides’.
Though talks are expected to continue until Sunday evening, as a result of the decision between Johnson and von der Leyen.
Speaking this morning Foreign Secretary Dominic Rabb suggested that Sunday should be seen as a hard deadline. Meaning the UK would leave with a no deal in three weeks’ time if an agreement cannot be found.
Mr Rabb stated that:
‘I think we view it as a point when we need some finality.’
‘We will leave no stone unturned, we would like a free trade deal with the EU.’
‘But we’re not going to sacrifice the basic points of democratic principle on fisheries or on control of our laws as we leave the transition period.’
Furthermore, GDP growth slowed to just 0.4% in October, adding pressure to the Sterling on fears the UK went into lockdown with the economy already slowing, increasing the chance of negative fourth quarter growth.
New Zealand Dollar (NZD) Boosted by Risk-On Trade
The New Zealand Dollar (NZD) made significant gains today on the back of increased market risk appetite and weakness in the US Dollar.
The ‘Kiwi’s gains came despite a disappointing increase in November’s electronic retail card spending figures.
Although it was the third consecutive increase month-on-month, spending only rose only 0.1% in November on the previous increase of 8.8% in October, suggesting a slowdown of spending and fuelling concerns of subdued economic activity.
Canada became the secondary country to approve a coronavirus vaccine, which helped buoy the NZD on the hopes more countries will soon follow.
GBP/NZD Outlook: Brexit in Spotlight as Last Minute Talks Continue
Looking forward Brexit will continue to dominate the GBP/NZD exchange rate as a ‘hard deadline’ of Sunday brings volatility to the Sterling.
If there are still no signs of a possible post-Brexit trade agreement before Sunday – the deadline for a deal – then we could see the GBP/NZD exchange rate plummet.
New Zealand Dollar (NZD) investors will be looking to the release of the New Zealand Manufacturing PMI this evening, with an increase in manufacturing being positive for the NZD.
The ‘Kiwi’ will likely head higher this week as Covid-19 vaccine rollouts offer hope of a steady recovery for the global economy.