After hitting its worst levels on record last week, the Pound New Zealand Dollar (GBP NZD) exchange rate attempted a recovery.
However, as ‘hard Brexit’ concerns weigh on markets the Pound is struggling to sustain many gains, even against the weak ‘Kiwi’.
Pound (GBP) Limp as ‘Hard Brexit’ Concerns Weigh
The Pound has thus far failed to recover from a sudden ‘flash crash’ seen in foreign exchange markets last Friday. The currency plummeted across the board during the Asian session but the exact cause is still a point of speculation among analysts.
Amid a lack of fresh key data, the Pound has been left entirely at the whims of Brexit-concerned investors.
Analysts speculate that it is only recently that the reality of a Brexit has hit many traders, who had previously hoped for Britain to retain access to the European Union’s single market following the Brexit process.
However, hopes for that have faded over the last week, and the possibility seemed increasingly implausible on Monday after UK Prime Minister May announced that MPs would not be allowed to vote on the terms of a Brexit.
On Tuesday, Sterling came under pressure again as a report – supposedly leaked from the government – claimed that the UK Treasury would have to pay an additional £66b a year without single market access.
New Zealand Dollar (NZD) Weak as ‘Kiwi’ Selloff Continues
Demand for the New Zealand Dollar has been mixed since last week, with bets of further easing from the Reserve Bank of New Zealand (RBNZ) and faltering dairy prices weighing on the currency.
Compared to the Reserve Bank of Australia (RBA), which plans to keep rates on hold long-term, and the Federal Reserve (which hopes to hike US interest rates once before 2016), the RBNZ is adopting a rather dovish outlook, and this is resulting in the ‘Kiwi’ underperforming its fellow high-risk currencies.
GBP/NZD Forecast: Political News to Dictate Movement
Neither Britain nor New Zealand has much in the way of key data due for publication until next week’s Consumer Price Index (CPI) reports come out. As a result, the GBP/NZD exchange rate is more likely to continue moving in response to market cross-flows and political news.
‘Hard Brexit’ concerns have kept Sterling pressured for over a week now, and while the selloffs have cooled it appears that the currency is lacking the impetus to make a solid recovery.
However, the Pound may be given a slight boost if Thursday’s house price balance report from RICS impresses.
As for the New Zealand Dollar, business PMI may give the ‘Kiwi’ a little lift if it impresses, but as of Tuesday the RBNZ is still expected to be headed towards a cut sooner rather than later.