The Pound to New Zealand Dollar exchange rate slipped back towards record lows on Monday morning as markets woke up this week with an appetite for risk thanks to Sunday’s developments in the 2016 US Presidential race.
GBP/NZD lost around half a cent as the European session got underway.
Pound (GBP) Demand Fades as Attention Turns to US Election
While Sterling broadly strengthened last week on hopes MPs would have more scope to fight for access to the European Union’s single market in Brexit negotiations, GBP’s rally faded by Monday.
Instead, UK markets awaited formal confirmation from the UK government that it would be appealing the High Court’s decision on Article 50.
That being said, UK news isn’t really capturing investors’ attention with Tuesday’s US election looming.
New Zealand Dollar (NZD) Boosted by US Election Bets
Despite an interest rate cut from the Reserve Bank of New Zealand (RBNZ) being expected this week, even the New Zealand Dollar was able to benefit from the latest shift in US Presidential election bets.
Democrat Presidential candidate Hillary Clinton had been under intense scrutiny over her usage of a private email server but the FBI confirmed on Sunday that despite re-opening the case, Clinton was cleared of potential criminal charges.
As a result, markets celebrated with higher bets of a Clinton win. Clinton is seen as the ‘status quo’ candidate and her Presidency would calm market volatility – initially at least. Hopes for this outcome led risky currencies like the ‘Kiwi’ higher on Monday.
GBP/NZD Forecast: US Election and RBNZ Meeting in Focus
Pound to New Zealand Dollar exchange rate volatility is likely to worsen over the next few days regardless of who wins the US Presidential election on Tuesday as the Reserve Bank of New Zealand’s (RBNZ) November policy decision approaches.
The RBNZ is widely expected to be planning to cut New Zealand’s interest rate at this week’s meeting, which is likely to lead to a drop in NZD.
However, if Republican Donald Trump wins the US Presidency on Tuesday, the ‘Kiwi’ will plummet far further. Trump’s unorthodox economic and foreign policies would inspire markets to flock towards ‘safe havens’, undermining risky currencies.
This scenario would potentially leave GBP/NZD notably higher by the end of the week, but a Clinton win could see the opposite happen despite the RBNZ’s expected rate cut.
Either way, significant movement is highly likely for the Pound New Zealand Dollar exchange rate in the coming week.