Pound Sterling to New Zealand Dollar Continues to Slide as G20 Summit Commences

Pound to New Zealand Dollar Remains Under Pressure amid Lack of Brexit Optimism

UPDATE: Despite risk-sentiment fading slightly as the G20 summit in Argentina begins, and with investors looking to prepare for upcoming volatility, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has remained close its worst levels for the year to date.

Since this morning, GBP/NZD has hit a new yearly low and the pair is trending near those lows at the time of writing.

Demand for risky trade-correlated currencies was bolstered slightly by news that the US, Mexico and Canada had signed a new trade deal at the G20 summit.

Investors are now hotly anticipating the outcomes of key leader meetings at the summit over the weekend.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Left Unappealing Amid Brexit Uncertainties

Investors have had little reason to buy the Pound Sterling over New Zealand Dollar (GBP/NZD) this week, especially as the New Zealand Dollar (NZD) has been benefitting strongly from hopes of a breakthrough in US-China trade relations.

Since opening the week at the interbank level of NZ$1.89, GBP/NZD has lost almost four cents in value. At the time of writing on Friday, GBP/NZD was trending just above its worst levels in over a year.

For most of the week, the trade-correlated New Zealand Dollar has benefitted from speculation that the US and China could soon de-escalate long-lasting trade uncertainties in some way.

This made it easy for the New Zealand Dollar to gain versus the Pound (GBP), which has been weak amid a lack of perceived support for UK Prime Minister Theresa May’s Brexit plan.

Pound (GBP) Exchange Rates Slump on Fears of No-Deal Brexit

Sterling (GBP) has spent most of the week looking unappealing as investors remain anxious about the lack of domestic support for UK Prime Minister Theresa May’s negotiated Brexit plan.

The plan, reached after over a year of tough negotiation between the UK and EU, will go to a parliamentary vote on 11 December – and the chances the bill will pass are perceived as being low.

Even within May’s ruling Conservative Party and the allied Democratic Unionist Party (DUP), many have indicated they will vote against her deal when it comes to the Commons vote.

Analysts now widely predict that the bill will be blocked during its first run through Parliament, and uncertainties about how this could affect the Brexit process have dampened Sterling demand.

Theresa May has said that in the event the deal is blocked, the government would ramp up preparations for a no-deal scenario.

Concerns that there would not be enough time to renegotiate a deal if it fails to pass Parliament has worsened market fears, keeping the Pound under pressure.

New Zealand Dollar (NZD) Exchange Rate Bolstered by Trade Breakthrough Hopes

For much of 2018, trade-correlated currencies like the New Zealand Dollar (NZD) have been undermined by fears that tensions between the US and China could worsen to an extent that they have a negative impact on the global economy.

These trade fears made investors hesitant to take risks, causing broad weakness in riskier currencies like the ‘Kiwi’.

As a result, the New Zealand Dollar has benefitted strongly from this week’s speculation that the US and China could soon reach some kind of breakthrough in trade relations.

US President Donald Trump and Chinese President Xi Jinping are expected to meet for a formal dinner at the G20 summit in Argentina this weekend.

US officials have indicated that if both leaders are open to concessions there could be a breakthrough trade agreement. Hopes for some kind of de-escalation have inspired investors to take more risks this week.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Anticipate G20 Outcomes

As there are not expected to be any major Brexit development until 11 December, Pound to New Zealand Dollar (GBP/NZD) exchange rate traders will turn their attention towards US-China trade tensions in the coming sessions.

In particular, the anticipated upcoming meeting between Trump and Xi is likely to dominate market focus as the week draws to an end.

Any signs of de-escalation in trade tensions before markets close, or during the weekend, will lead to a strong rise in demand for trade-correlated currencies like the New Zealand Dollar (NZD) next week.

On the other hand, if the two leaders fail to reach an understanding or if tensions worsen, this would disappoint investors expecting some kind of progress.

Some UK PMIs will be published next week but may be overshadowed by Brexit jitters, and with no notable New Zealand data on the calendar it means the ‘Kiwi’ will likely be driven largely by trade news.

Essentially, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is only likely to advance over the next week if the failure of the G20 talks or some renewed US-China trade tensions occur.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard