The Pound has firmed against the New Zealand Dollar today, rising from an exchange rate of 1.8714 to 1.8770.
This appreciation comes as the economists closely scrutinise the policies of the new NZ government.
Among some of the concerns, there are fears that tighter immigration policies might deprive the country of much-needed migrant workers.
(First published October 19th, 2017)
The Pound finds itself on a precipice, threatening to fall against the New Zealand Dollar and other peers if Brexit talks go badly.
In New Zealand, the focus is on the policies of the new government, now confirmed to be a Labour-NZ First coalition supported by the Green Party.
Future Pound Forecast: No-Deal Brexit could Trigger GBP Crash
At a time of high uncertainty in the UK over Brexit, there seems to be one sure-fire course of action which could shatter the value of the Pound.
This will be a ‘Hard Brexit’, which effectively means the UK calls time on negotiations with the EU and crashes out without a clear parting deal.
While this could theoretically see the UK avoid paying billions to the EU as part of a ‘divorce settlement’, it would also likely put the UK trading under World Trade Organisation (WTO) rules.
While a WTO trade agreement is still an agreement, it is considered vastly inferior to a ‘bespoke’ trade agreement made with the EU.
In a recent letter published in the Telegraph, a number of high-ranking Conservatives have called for Theresa May to abandon talks with the EU unless they discuss trade deals.
Among them has been Owen Paterson, a former cabinet minister. Mr Paterson has said;
‘It is inevitable, with ineluctable certainty we are going to end up with WTO rules at the end of this anyway.
We are saying it would be much better to state that now, give business and administrative organisations certainty so they can begin to prepare.
What we should not be terrified of is the WTO. We have to face the fact that this summit is not going to discuss any future trade deal’.
In the event that the UK does seem to be facing a catastrophic crash out of the EU without remaining ties to the multinational union, the Pound could drop sharply.
Will Labour-NZ First Coalition bring Future New Zealand Dollar Gains?
At the time of writing, the New Zealand Dollar was trading poorly because of a shock development in NZ politics. In the NZD/GBP exchange rate, a -1.3% decline has been seen.
Almost four weeks after the 2017 New Zealand general election, the government has finally been decided.
In a surprise twist, NZ First Leader Winston Peters has chosen to ally with former opposition party Labour, instead of the Nationals who led the previous government.
While not a direct part of the coalition, the Green Party is also offering its support to provide NZ First and Labour with the required majority.
Because the status quo is now in tatters, the New Zealand Dollar has fallen sharply.
In the wake of Peter’s announcement, traders have been frantically poring through campaign promises and policies to see what the new government will try and achieve.
Labour leader Jacinda Ardern is expected to push for greater home building and home ownership, along with a ‘period of renegotiation’ on the Trans-Pacific Partnership (TPP).
If traders quickly come around to the possibilities offered by this new coalition government, the New Zealand Dollar could pick up against the Pound.
In these very early days of the Ardern-Peters administration, however, there may just be a sustained period of adjustment as ministers and economists find their feet.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.8714 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5341.
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