Pound to New Zealand Dollar Exchange Rate Rises Above Week’s Opening Levels on Brexit Hopes
UPDATE: While investors remain anxious about the possibility of a ‘no-deal’ Brexit, speculation that progress is being made helped the Pound to New Zealand Dollar (GBP/NZD) exchange rate advance on Wednesday.
Pound (GBP) investors anticipated fresh comments from Brexit Minister Dominic Raab, keeping the Pound firm.
Meanwhile, news that the deadline for a Brexit deal had been delayed offered Sterling a little relief too. GBP/NZD is trending in the region of NZ$1.92 at the time of writing.
Pound to New Zealand Dollar Exchange Rate Rebounds from Lows as Risk-Rally Cools
On Tuesday, investors indulged in buying risky trade-correlated currencies on news that the US and Mexico had reached an agreement on a trade treaty. However, the risk-rally didn’t last long and the Pound to New Zealand Dollar (GBP/NZD) exchange rate recovered slightly on Wednesday.
Since opening this week at the interbank level of NZ$1.92, GBP/NZD has fluctuated due to New Zealand Dollar (NZD) volatility. On Wednesday morning, GBP/NZD touched a three-week-low of NZ$1.91 before climbing back towards the week’s opening levels.
The primary cause for GBP/NZD fluctuations this week has been trade developments, but the Pound (GBP) may have done a better job at holding its ground if ‘no-deal’ Brexit jitters hadn’t persisted.
Investors hesitated to buy the Pound back from its cheapest levels on Wednesday, and the New Zealand Dollar didn’t fall too much either as markets remained optimistic about trade developments.
Essentially, Wednesday’s move was a rebound from Tuesday’s plunge.
Pound (GBP) Exchange Rate Recovery Limited by ‘No Deal’ Brexit Fears
On Tuesday, yet more headlines about the possibility of a worst-case scenario ‘no-deal’ Brexit knocked back the Pound (GBP). This has been the primary news influencing Sterling so far this week.
UK Prime Minister Theresa May said on Tuesday that a ‘no-deal’ outcome for Brexit talks ‘wouldn’t be the end of the world’.
Her acknowledgement that Brexit could occur without any deal in place and her lack of criticism towards the possibility disappointed investors, leading the Pound to fall.
As concerns of a worst-case scenario persisted and kept the British currency generally unappealing, its Wednesday recovery was limited as investors bought the currency back slightly from its cheapest levels.
Still, market anticipation for an upcoming speech from UK Brexit Minister Dominic Raab did help Sterling to firm slightly on Wednesday morning.
New Zealand Dollar (NZD) Exchange Rate Avoids Further Losses on Trade Optimism
A combination of investors buying back the Pound (GBP), as well as a stronger US Dollar (USD), left the New Zealand Dollar (NZD) weaker on Wednesday.
The New Zealand Dollar jumped on Tuesday, as investors reacted to news that the US had finally reached an overhauled trade deal with Mexico following months of obstacles.
As a trade-correlated currency, the New Zealand Dollar benefitted strongly from this positive trade development.
While the US Dollar (USD) recovered slightly on Wednesday and weighed on the New Zealand Dollar’s appeal, hopes for the US to also reach a trade deal with Canada kept the New Zealand Dollar from tumbling too far.
According to Nick Smyth, Bank of New Zealand interest rate strategist:
‘While there remain a number of sticking points between Canada and the US, including the protections afforded to the Canadian dairy sector, the market seems to be viewing recent developments positively for now,’
Pound to New Zealand Dollar (GBP/NZD) Forecast: Brexit and Trade Developments Remain in Focus
As UK and New Zealand data due in the coming days is unlikely to be hugely influential, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is more likely to react to domestic and global political developments.
The most noteworthy UK and NZ ecostats due before the end of the week include NZ building permits and confidence stats on Thursday and Friday, as well as UK consumer confidence data on Friday.
While some of these figures could prove influential, potential Brexit developments or news regarding US trade is much more likely to drive GBP/NZD.
If UK Brexit Minister Dominic Raab’s Wednesday comments leave a lasting impression on investors, it could bolster a Sterling (GBP) recovery.
However, worsened ‘no deal’ Brexit fears would have the opposite effect and could keep GBP/NZD near its worst levels.
Either way, some analysts have noted that the Pound probably doesn’t have much further to fall and may even be oversold.
As for the New Zealand Dollar (NZD), developments regarding US trade, particularly with Canada or China, are also likely to influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate.