Pound Sterling to New Zealand Dollar Exchange Rate Volatile as Investors Anticipate Brexit Developments

The British Pound saw notable gains against most major currencies last week, including the New Zealand Dollar (GBP/NZD), due to hopes surrounding the progress of Brexit talks.

The interbank GBP NZD exchange rate climbed from 1.90 to a high of 1.98 last week, before entering the weekend trading in the region of 1.95.

The Pound edged higher again on Monday as markets anticipated news from the latest round of negotiations.

Pound Sterling Supported by Hopes of Brexit Breakthrough

Sterling broadly strengthened on last week’s reports that UK and EU negotiators were drawing closer to coming to an accord on Brexit divorce proceedings.

Investors have been eagerly hoping for the first phase of Brexit talks to come to a conclusion, in the hope it will allow key UK-EU trade talks to get underway.

As the Brexit ‘divorce bill’ has been a major source of contention for months now, news that the UK and EU were close to an agreement on the price of the bill left investors much more optimistic that a breakthrough in talks could happen in the coming week.

However, concerns remain about the issue of the Irish border. Both Ireland and Northern Ireland wish to keep a soft border even after Brexit, but UK officials have stated that is unlikely to be possible.

Mutterings on Monday morning that EU negotiators were optimistic on a deal being reached this week boosted the Pound further.

Recent UK data has been relatively optimistic and has also helped the Pound hold its ground.

Markit’s November manufacturing PMI beat expectations on Friday, followed by a better-than-expected construction PMI on Monday morning.

New Zealand Dollar (NZD) Limited by Low Risk-Sentiment

The New Zealand Dollar has been struggling in recent sessions amid a lack of highly influential domestic data.

Limit demand for higher-risk assets has also been weighing on the New Zealand Dollar.

Last week saw Senate Republicans pass the US tax bill, with further discussion on tax scheduled to take place this week.

While this was positive for the US Dollar, USD gains were limited due to political developments as former US national security adviser Michael Flynn pleaded guilty to lying to the FBI over the contact he had with Russia during Donald Trump’s 2016 Presidential campaign.

GBP NZD Forecast: Brexit Deal Could Boost Pound

Market focus remains on Brexit today amid hopes that UK EU negotiations will see a major breakthrough.

UK data is unlikely to be particularly influential in the coming days with Brexit so firmly in the spotlight.

Still, the risky ‘Kiwi’ could be influenced by the first December Global Dairy Trade (GDT) auction on Tuesday. If dairy prices begin to recover from November’s declines, this could give the New Zealand Dollar a lift.

Data Affecting This Week’s New Zealand Dollar Exchange Rate Forecast

5th December GBP Markit/CIPS UK Services PMI (NOV)

5th December NZD Global Dairy Trade Price Index

7th December GBP Halifax House Price Index (YoY) (NOV)

8th December NZD Manufacturing Sales (YoY) (Q3)

8th December GBP Balance of Trade (OCT)

8th December GBP Manufacturing Production (YoY) (OCT)

8th December GBP Industrial Production (YoY) (OCT)

8th December GBP Consumer Inflation Expectations (Q4)

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons