Danger of MP Revolt over Brexit Limits GBP/NZD Exchange Rate Movement
The Pound to New Zealand Dollar (GBP/NZD) exchange rate edged higher over the course of last week, rising 2 cents from the week’s worst levels.
The pairing remains close to a two-week high, but Brexit-related news has prevented Sterling from extending gains.
Following the mixed reception to the ‘Chequers plan’ on Brexit, there has been growing concern that Conservative MPs could challenge Prime Minister Theresa May.
Brexit Secretary David Davis, Foreign Secretary Boris Johnson and other Conservative officials resigned in opposition to the plan, as they believe that it could ‘water down’ Brexit.
The latest warning sign has come from Conservative MP Jacob Rees-Mogg, who (when asked about how many MPs plan to oppose Mrs May) said:
‘We’ll have an idea of the numbers at 10pm on Monday evening.’
If there was a successful challenge to the PM’s leadership, a new PM could aim for a ‘hard Brexit’ or even no Brexit agreement with the EU.
This possibility has unsettled Pound traders today, leaving GBP exchange rates trending in a narrow range.
NZD Exchange Rates Struggle on RBNZ Rate Hike Scepticism
Meanwhile, the New Zealand Dollar (NZD) has faced headwinds because of market uncertainty and a general risk-off attitude.
This evening’s NZ inflation rate data is tipped to show a faster pace of annual price growth, but economists don’t think that this will push the Reserve Bank of New Zealand (RBNZ) to raise interest rates.
Consider the possibility of continued pressure from high inflation rates, Westpac Bank Chief Economist Dominick Stephens said:
‘We don’t think that the rise in inflation this year will necessarily be sustained.
‘Maintaining inflation around 2% next year would require a further surge in world oil prices and/or a continued slide in the exchange rate.’
GBP/NZD Exchange Rate Turbulence Forecast on UK Jobs Market Data
This week, Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate movement may be caused by NZ inflation rate figures (due out later today) and UK jobs market stats on Tuesday morning.
Beyond these readings, it is also worth watching out for a global dairy price measure on Tuesday, UK inflation data on Wednesday and UK retail sales stats on Thursday.
This evening’s NZ inflation data could push the New Zealand Dollar briefly higher if it shows forecast-matching or beating levels of price growth.
Meanwhile, Pound Sterling (GBP) exchange rates could rally if Tuesday’s jobs market data shows a faster pace of wage growth, while a surprise drop in the unemployment rate could further support GBP/NZD.
An acceleration in the annual rate of UK inflation on Wednesday may extend any existing GBP/NZD gains, particularly if it supports the case in favour of an August interest rate hike from the Bank of England (BoE).