The Pound to New Zealand Dollar exchange rate has fluctuated within a large range since last week. Due to a lack of strong domestic data, the New Zealand Dollar has been unable to capitalise on the Pound’s political jitters as Brexit negotiations begin. GBP NZD briefly dipped to 1.7499 on Monday but has generally trended close to the week’s opening levels of 1.7625.
Pound (GBP) Limp amid Britain’s Political Uncertainty
Despite lingering uncertainty about Britain’s government since the general election earlier in June, Brexit negotiations began as planned on Monday, with UK Brexit Secretary David Davis seemingly optimistic as talks finally started.
According to Chief EU negotiator Michel Barnier, negotiating teams hope that the first meeting will be used to set out a negotiation timetable as well as agreements on the biggest priorities.
Priorities are expected to include the status of UK and EU expats, as well as the Brexit ‘divorce bill’ and the matter of Northern Ireland’s border with the Republic of Ireland.
The Pound has seen mixed movement amid uncertainty about Brexit negotiations and how successful they could be under a weaker Conservative government.
Since the UK election, the Conservative party has maintained it will run a minority government with the support of Northern Ireland’s Democratic Unionist Party (DUP). However, concerns remain about the long-term stability of this arrangement, which has kept the Pound under pressure.
New Zealand Dollar (NZD) Mixed Despite Strong Domestic Data
The New Zealand Dollar has struggled to sustain its advances against the Pound over the last week.
With political uncertainties in major economies like Britain and the US, market demand for the risky ‘Kiwi’ has been limited.
Solid New Zealand data published during Monday’s Asian session was not influential enough to notably improve NZD trade.
Westpac’s Q1 consumer confidence survey improved from 111.9 to 113.4, while the PSI services print for May rose from 53.2 to 58.8.
Markets are also cautious of NZD trade ahead of this week’s key New Zealand news, which includes a dairy auction and a policy decision from the Reserve Bank of New Zealand (RBNZ).
GBP NZD Forecast: UK Politics and RBNZ in Focus
Any surprisingly developments from UK-EU Brexit negotiations this week could have a big impact on Pound trade, but it’s also possible that nothing much will change this week besides making a more fleshed out negotiation plan.
Uncertainty remains about Britain’s government too. A minority government led by the Conservatives and backed by the DUP is expected to lead following the Queen’s Speech, which is set to take place on Wednesday.
However, criticism of UK Prime Minister Theresa May has ramped up following her drop in popularity in recent weeks. Speculation continues that she will not remain in power for much longer. If May does happen to step down, the Pound will plunge.
There’s plenty for New Zealand Dollar traders to react to this week too. Tuesday will see the Global Dairy Trade (GDT) hold its second June auction for New Zealand’s most lucrative commodity.
Then during Thursday’s Asian session the Reserve Bank of New Zealand (RBNZ) will be holding its June policy decision. If the bank takes on a hawkish tone, GBP NZD could drop.