In an unexpected development, the Pound dropped against the New Zealand Dollar after the hotly anticipated Supreme Court announcement – despite the result seeming to support GBP demand.
The New Zealand Dollar’s advance against the Pound came even as a fledgling Trump administration dealt a heavy blow to the future of New Zealand’s trading ambitions.
Last week, the Pound climbed strongly against the New Zealand Dollar on Brexit news, advancing from 1.69 to 1.72 before the weekend.
Surprising Pound Weakness comes as Devolved Nations Denied Article 50 Veto
The Pound dropped across the board following the Supreme Court verdict on the Government’s Article 50 appeal.
As expected, the judges ruled in favour of Parliament having to vote on the Article being triggered, but the news that the governments of devolved nations like Scotland and Northern Ireland won’t be allowed a say raised the spectre of a second Scottish independence referendum and weakened GBP.
New Zealand Dollar Stable despite TPP’s Future Remaining Unclear
The latest NZD movement was inspired by US President Donald Trump deciding to immediately withdraw the US from the Trans-Pacific Partnership (TPP) trade deal, which New Zealand is part of.
It was previously said that the TPP couldn’t work without the US, but the still signed-up members are attempting to adapt the agreement to include the long-time trading rival of the US, China, as well as Indonesia.
However, Japan could create difficulties in these proceedings. As Japanese GDP represents around 79% of all original signatories, the agreement’s rules require Japan to be a member or else the deal will collapse due to an insufficient level of input.
At the time of writing there was speculation that Japan could pull out and sink the deal to appease the new US administration, but this had not gone beyond the assumption stage.
GBP/NZD Exchange Rate Forecast
This week, further Pound Sterling/New Zealand Dollar exchange rate movement may occur as the result of a speech from Bank of England (BoE) official Mark Carney and UK GDP growth rate estimates for Q4.
New Zealand news will consist of Q4 inflation figures and trade balance results for December.
Hawkish commentary from Carney or a better-than-forecast UK growth figure could boost GBP.
However, upcoming Q4 NZ inflation figures are expected to print positively on both the quarter and the year – a potentially supportive result for the New Zealand Dollar.