After tumbling during the first half of last week, the GBP NZD exchange rate managed to rebound and continues to make gains today after New Zealand’s Prime Minister resigned unexpectedly over the weekend.
Pound Recovers Losses after Brexit Minister Floats Single Market Access Post EU Exit
Last week was one of two halves for the Pound New Zealand Dollar exchange rate. A meeting to discuss curbing oil production by the world’s largest oil cartel caused severe market volatility. This actually benefitted the ‘Kiwi’, weakening GBP NZD, despite its commodity-correlated status. This is because New Zealand’s strong interest rates make government bonds a desirable asset in times of uncertainty, so investors were still demanding the New Zealand Dollar for the first half of the week.
However, the latter half of week saw becalmed investors selling out of the ‘Kiwi’ again. Comments from Brexit Minister David Davis also helped support the Pound; he suggested the UK may remain a member of the single market after quitting the European Union. This saw GBP NZD more than recover the losses sustained during the first half of the week, with the pairing ending the week at 1.78 after dropping to 1.74.
GBP NZD Surges as New Zealand Prime Minister Announces Shock Resignation
This week saw the GBP NZD exchange rate surge 1.2% to a two-month high of 1.79 after New Zealand Prime Minister John Key shocked markets by resigning, citing a desire to spend time with his family. Key is a popular leader and has presided over the country in the fallout from the global financial crisis since 2008. His policies have ensured that New Zealand enjoys strong economic fundamentals, which have seen interest rates remain high compared to other developed nations. Concern that this could change under a leader with less fiscal acumen is keeping investors wary of the ‘Kiwi’.
This is allowing the Pound New Zealand Dollar exchange rate to continue strengthening, despite the uncertainty caused by the ongoing UK Supreme Court hearing regarding the triggering of Article 50. The High Court has already ruled that Parliament should have a say on the invocation of the official EU exit clause, but the government instantly appealed the decision. The hearing will last for four days, but the Justices are not expected to make a decision until early January.
Pound New Zealand Dollar Exchange Rate Forecast; Sparse New Zealand Data to Keep Investors Jittery?
The fact that nothing will come of the UK Supreme Court case until 2017 is likely to keep investor concerns at bay, allowing upcoming UK data to move GBP NZD exchange rates.
Tomorrow sees the release of industrial and manufacturing production reports, both of which are expected to show year-on-year improvements. The NIESR GDP estimate for November is expected to clock in at 0.4% again.
Friday brings the latest UK trade balance data; considering how wide the deficits currently are, there is a chance that even an improvement here won’t particularly benefit the Pound. The latest UK inflation data is set for release next Tuesday.
After today’s dairy auction results, most of the data to influence the New Zealand Dollar will come from China. Chinese trade balance figures on Thursday could overshadow domestic card spending data, while Friday’s Chinese inflation figures are likely to eclipse New Zealand’s house sales report.
With few domestic ecostats, the turbulence from John Key’s shock resignation could remain to hinder the New Zealand Dollar.