Pound to New Zealand Dollar Exchange Rate Holds Ground as Bank of England (BoE) Bets Rise
UPDATE: The Pound (GBP) was able to hold its ground against the New Zealand Dollar’s (NZD) steady demand thanks to fresh comments from Bank of England (BoE) Governor Mark Carney on Thursday.
During an earlier speech at the Northern Powerhouse Business Summit in Newcastle, Carney said:
‘Domestically, the incoming data have given me greater confidence that the softness of UK activity in the first quarter was largely due to the weather, not the economic climate.’
The Pound to New Zealand Dollar (GBP/NZD) is continuing to trend near the week’s opening levels at the time of writing.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Strength Limited by Brexit Uncertainties
On Wednesday, Britain’s latest services PMI beat forecasts, bolstering the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate, as well as Bank of England (BoE) interest rate hike bets.
However, as GBP/NZD closed in on its best levels in a month and the New Zealand Dollar (NZD) neared major lows against other major currencies such as the US Dollar (USD), GBP/NZD has been unable to hold onto its best levels.
Instead, Pound (GBP) investors anxious about the Brexit process have proved to be hesitant to buy the British currency too much against the sturdy New Zealand Dollar.
This week so far, GBP/NZD has fluctuated in a tight band within the interbank levels of 1.94 and 1.96. At the time of writing on Thursday, GBP/NZD had slipped back towards the week’s opening levels of 1.95.
Pound (GBP) Exchange Rates Pressured by Brexit Jitters despite BoE Bets
Britain’s June PMI results from Markit all printed higher than forecast in the first half of the week, generally indicating to investors that the UK economy had rebounded following a weak performance earlier in the year.
The most notable print was the services PMI, which unexpectedly improved to 55.1 rather than remaining at 54.0 as forecast.
As the services sector makes up a big chunk of Britain’s economic activity, it was a strong indication that Britain’s economy was more resilient at the end of Q2 2018.
Following the report, investors became more optimistic that the Bank of England (BoE) was on track to hike UK interest rates as soon as its August policy decision meeting next month.
Despite this, Sterling (GBP) demand was limited on Thursday due to fresh warnings from businesses about the potential negative effects a ‘no deal’ Brexit could have on jobs and the economy.
Jaguar Land Rover and Tata Motors, both carmakers within the Tata Motors Group, have warned that UK plants and many jobs could be lost if no post-Brexit UK-EU deal is agreed.
New Zealand Dollar (NZD) Exchange Rates Driven by Rival Strength and Risk-Sentiment
Following the Reserve Bank of New Zealand’s (RBNZ) dovish June policy decision last week, the New Zealand Dollar (NZD) has been lacking in domestic support, and has been driven mostly by risk-sentiment.
This hasn’t given traders much reason to buy the New Zealand Dollar either, with investors increasingly hesitant to buy risky trade-correlated currencies like the ‘Kiwi’ due to global trade worries.
However, as the New Zealand Dollar has seen significant lows against rivals recently, reaching key support levels, investors have been buying the currency from its worst levels.
Suggestions that NZD selling and bets against the ‘Kiwi’ had been overdone also helped the currency to hold against further losses.
Pound to New Zealand Dollar (GBP/NZD) Forecast: Trade Developments to Remain in Focus
Uncertainties about how the Brexit process may impact businesses and trade between the UK and EU, as well as jitters about US policies impacting trade-heavy nations like New Zealand, will remain in focus over the next week.
The economic calendar will be quieter until next week, with Britain’s labour productivity results on Friday unlikely to be particularly influential.
Instead, potential developments regarding Brexit are likely to remain the focus for Pound traders. Unless there are positive developments for UK and EU businesses soon, Sterling (GBP) trade may simply remain unappealing.
Demand for the New Zealand Dollar (NZD) is likely to remain limited unless there are signs that US President Donald Trump could row back slightly from some of his most controversial trade tariff plans.
As Brexit worries worsen among businesses and trade war concerns become greater, the Pound to New Zealand Dollar (GBP/NZD) exchange rate could see further volatility ahead.