Pound to New Zealand Dollar Exchange Rate’s Brexit Gains Limited by Fears of Domestic Opposition
UPDATE: After spending most of Monday morning weaker in response to concerns that a Brexit deal could be blocked from passing through Parliament, the Pound Sterling to New Zealand Dollar (GBP/NZD) rebounded slightly in the afternoon.
This follows the surfacing of a report, claiming that EU Chief Negotiator Michel Barnier was telling ministers from other EU member states that the main elements of a Brexit text were ready.
The Pound’s (GBP) recovery was limited against a strong New Zealand Dollar (NZD), nevertheless, as risk-sentiment remained high.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Continues to Tumble on UK Brexit Tensions
As hopes of an incoming UK-EU Brexit deal failed to keep supporting Sterling (GBP), the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate continued to tumble on Monday while concerns of domestic opposition to a potential Brexit deal worsened.
Thanks to a combination of fading Brexit optimism and a rallying New Zealand Dollar (NZD), GBP/NZD tumbled over two cents last week.
GBP/NZD fell further when markets opened on Monday, and at the time of writing was trending close to its worst levels in over four months.
Meanwhile, risk-sentiment was mixed but the New Zealand Dollar (NZD) outlook has been higher since last week.
Pound (GBP) Exchange Rates Slide as Domestic Brexit Fears Rise
Fresh concerns that UK Prime Minister Theresa May will be unable to please all sides and pass a potential UK-EU Brexit deal into law have caused investors to sell off the Pound (GBP) since markets opened.
In recent weeks, investors have been buying the Pound on speculation that the UK and EU were finally closing in on a Brexit deal.
However, due to a lack of notable developments last week and fresh reports this week about the potential domestic obstacles a Brexit deal would still face the Pound has weakened again.
Reports emerged today suggesting that even ministers within May’s Cabinet have been doubting the so-called ‘Chequers plan’ since it was first revealed.
New Zealand Dollar (NZD) Exchange Rates Firm Following Last Week’s Developments
The New Zealand Dollar (NZD) easily strengthened versus a weak Pound (GBP) this morning, as the risk-correlated currency continued to find support from last week’s news.
Perhaps the most significant development for NZD investors was New Zealand’s impressive Q3 job market report. While the nation’s labour costs results fell short, almost every other print was far stronger than expected.
New Zealand’s employment change figure surged to 1.1%, rather than remaining at 0.5% as expected. The key unemployment rate improved considerably, from 4.4% to 3.9% rather than worsening to the forecast 4.5%.
It was followed later in the week by the Reserve Bank of New Zealand’s (RBNZ) November policy decision.
Thanks to stronger domestic data, the RBNZ dialled down its cautiousness and took a more neutral tone. This doused fears that the RBNZ could cut New Zealand interest rates sometime soon.
While the New Zealand Dollar has seen little in the way of new developments since then, this has been enough to boost sentiment for the currency and keep the Pound to New Zealand Dollar (GBP/NZD) exchange rate sliding.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Recovery Potential Capped amid Brexit Jitters
There won’t be much in the way of notable New Zealand data published this week, so the Pound to New Zealand Dollar (GBP/NZD) exchange rate is more likely to be influenced by Brexit developments.
With November almost halfway through and 2018 speeding to a close, March’s formal Brexit day is fast approaching and there is still no UK-EU deal.
Even if a Brexit deal is agreed in the coming weeks, it could still face significant obstacles in Parliament – including from within May’s Conservative Party.
Unless there are signs that she is able to get more critics on-side, the Pound (GBP) selloff could continue.
In the event that negotiations collapse or Parliament blocks a deal, the Pound will undoubtedly plummet on fears that it is too late for a second attempt.
Upcoming UK jobs market and inflation data could also influence the Pound, but Brexit developments and shifts in risk-sentiment are much more likely to drive the Pound to New Zealand Dollar (GBP/NZD) exchange rate in the near term.