Pound to New Zealand Dollar Movement Mixed amid Signs of Weaker Trade
Despite more mixed movement in the Pound (GBP) since yesterday, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has been able to avoid notable losses. This is due to a lack of New Zealand Dollar (NZD) strength.
Since opening this week at the level of 1.9615, GBP/NZD has been trending with a solidly upside bias. Investors are hesitant to buy the New Zealand Dollar.
While GBP/NZD has been unable to hold Tuesday’s half-month-highs of 1.9830, the pair still trends high near the level of 1.9748 at the time of writing on Thursday.
The Pound outlook remains murky on upcoming Brexit uncertainties. The New Zealand Dollar outlook, on the other hand, has steadied slightly as last weekend’s military tensions may not escalate further.
Pound (GBP) Exchange Rates Struggle for Direction amid Brexit Uncertainties
Some investors are more optimistic about the outlook for Brexit, while others are more pessimistic. What is evident, is that the Brexit outlook for 2020 remains filled with uncertainties.
Sterling briefly jumped in demand yesterday, amid expectations that the current phase of the Brexit process would conclude smoothly and prevent a January no-deal Brexit.
However, this outcome was already widely expected. As UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen met yesterday, attention instead turned to the uncertainty of the transition period.
The UK government plans for the transition period to end at the end of 2020 with no extension. Von der Leyen said that a full deal would be ‘impossible’ under that short timeframe, which doused the Pound outlook.
Sterling is still jittery today, as Brexit uncertainties take focus amid a lack of notable UK data.
New Zealand Dollar (NZD) Exchange Rates Volatile amid Signs of Trade Concerns
Despite global risk sentiment calming in recent sessions, the New Zealand Dollar (NZD) has failed to capitalise and continued to slip against Sterling today.
The New Zealand Dollar is a currency often correlated to risk sentiment. News that further escalation between the US and Iran is currently unlikely was highly relieving for risk-sentiment. However, the New Zealand Dollar was unable to benefit.
NZD is also a currency highly correlated to trade, and signs of weakness in global commodity prices weighed on the currency today.
According to ANZ bank, the recent strength in the New Zealand Dollar has meant that a drop in the ANZ World Commodity Price Index may have hit New Zealand harder:
‘In local currency terms the fall in the index was even larger, down 5.5% m/m, due to the stronger New Zealand dollar. The NZD-TWI firmed 2.7% during December’
Pound to New Zealand Dollar (GBP/NZD) Exchange Rates Remain Focused on Geopolitics
While this week’s geopolitical developments have so far not had a lasting impact on the Pound or New Zealand Dollar, GBP/NZD is still likely to be driven by geopolitics towards the end of the week.
A lack of notable ecostats due for publication on Friday means the Pound will continue to be driven by Brexit. Global risk and trade sentiment will influence the New Zealand Dollar.
If there are any surprising developments in UK-EU Brexit relations or the Brexit bill’s passage through UK Parliament, the Pound will be shocked. A smooth passage for the remainder of the month would keep Sterling fairly resilient instead.
New Zealand Dollar strength could recover if there are signs of strength in global trade, though if US-Iran tensions continue to soften this will also keep the currency’s outlook brighter.
Monday will see the publication of UK growth and New Zealand building permits stats, which will influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate at the beginning of next week.