Pound to New Zealand Dollar Exchange Rate Slips as BoE Governor’s Term Only Sees Limited Extension
After surging around two cents on Monday thanks to the latest Brexit developments, the Pound to New Zealand Dollar (GBP/NZD) exchange rate briefly saw stronger demand on Tuesday morning.
The Pound (GBP) was supported by the day’s stronger-than-expected UK wage growth data.
However, Sterling was weighed down later in the session as investors reacted to confirmation that Bank of England (BoE) Governor Mark Carney’s term as Governor would be extended.
Economists had been hoping that Carney’s term would be extended until late-2020 or even 2021, but instead Carney will only be staying an additional seven months – until January 2020.
This was slightly disappointing and pulled back the Pound, keeping GBP/NZD off its best levels.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Could Be in For Another Week of Gains
UPDATE: The Pound to New Zealand Dollar (GBP/NZD) exchange rate is currently surging as investors react to the latest comments from EU Chief Negotiator Michel Barnier.
Barnier said this afternoon that he believed key Brexit issues, including the Irish border, could be ‘realistic’ to resolve within the next eight weeks.
His optimism that it was reasonable to expect a deal to be reached soon caused investors to buy the Pound (GBP).
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Struggles to Sustain Gains as Brexit Fears Persist
Last week’s Pound (GBP) bullishness hasn’t lasted, but the Pound to New Zealand Dollar (GBP/NZD) exchange rate still touched its best levels in over two years this morning thanks to some solid UK data.
The GBP/NZD interbank level is currently trending just above the week’s opening levels of NZ$1.97. Thus far GBP/NZD has been unable to hold this morning’s high of NZ$1.98, which was the best level for the pair since the Brexit vote in June 2016.
Some investors found the Pound more appealing on Monday morning, thanks to some stronger UK growth data.
However, some areas of the UK data, as well as uncertainties about the Brexit process, weighed on the Pound and made it harder for GBP/NZD to advance.
The New Zealand Dollar was unable to capitalise on the Pound’s mixed strength though, as US-China trade jitters left investors hesitant to buy risky trade-correlated currencies.
Pound (GBP) Exchange Rates Supported by UK Growth Stats
The Pound (GBP) saw mixed movement on Monday, as both economic and political developments caused more uncertainty than clarity.
Britain’s latest economic data beat expectations in some key prints, but showed signs of underlying weakness in others.
July’s UK Gross Domestic Product (GDP) growth rate report was forecast to have climbed from 0.1% to 0.2% month-on-month, but instead rose to 0.3%. The three-month-average print rose from 0.4% to 0.6%.
On the other hand, manufacturing and industrial production figures fell short of expectations in every major print in July.
According to John Hawksworth, Chief Economist at PwC:
‘The hot summer and the World Cup boosted retail spending in June and July, and latest business surveys suggest that positive services sector growth continued in August. But manufacturing output growth has weakened.
Looking ahead, however, the long hot summer could give way to a stormy autumn as Brexit-related uncertainty leads businesses to defer major investment decisions and subdued real wage growth weighs on consumer spending.’
New Zealand Dollar (NZD) Exchange Rates Limp as US-China Trade Jitters Worsen
Amid a lack of domestic news driving the New Zealand Dollar (NZD), and concerns that the Reserve Bank of New Zealand (RBNZ) is more likely to cut rates than hike them, the New Zealand Dollar has been driven by geopolitical news instead.
As US President Donald Trump has threatened to place tariffs on almost all US imports of Chinese goods, US-China trade war fears have risen once again.
The New Zealand Dollar is a relatively risky currency that is often correlated to developments in trade and commodity news. As New Zealand has strong trade ties to both the US and China, this news has made NZD less appealing.
Recent New Zealand data has also been disappointing. Monday’s Asian session saw the publication of the Q2 manufacturing sales report, which slowed from 2.3% to 2.1%. The previous figure was revised lower from 3.1%.
Pound to New Zealand Dollar (GBP/NZD) Investors Anticipate Bank of England News
The Pound (GBP) is most likely to drive the Pound to New Zealand Dollar (GBP/NZD) exchange rate over the coming week, while the New Zealand Dollar (NZD) will remain vulnerable to global trade developments and risk-sentiment.
Pound investors will have plenty to react to in the coming days, as key UK data will be published, the Bank of England (BoE) will hold its September policy decision, and more Brexit developments are also expected.
The BoE is not expected to announce any changes to monetary policy, but investors will pay close attention to its tone on Britain’s economic and monetary policy outlooks.
Markets are also anticipating news on the future of Bank of England Governor Mark Carney. Last week, Carney indicated he would be willing to extend his term as bank Governor if formally asked.
UK data could influence the Pound in the coming sessions as well, with UK jobs market data due on Tuesday including Britain’s key July wage growth rate.
As for the New Zealand Dollar, any developments in US-China trade tensions may continue to influence the GBP/NZD exchange rate outlook.