Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Rebounds from 2018 Lows on Article 50 Speculation

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Gains Slightly amid Faint Hopes for ‘No Brexit’

UPDATE: The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate rebounded slightly on Tuesday as investors reacted to comments from European Court of Justice (ECJ) Advocate General Manuel Campos Sanchez-Bordona.

Sanchez-Bordona suggested that the UK could unilaterally decide to reverse Article 50 and cancel Brexit.

Speculation of there being a second EU referendum has risen slightly as a result. This made the Pound (GBP) slightly more appealing, although concerns about the possibility of a ‘no-deal’ Brexit persist and have limited Sterling’s appeal.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Extends Losses on Risk-Sentiment and Brexit Jitters

UPDATE: Further optimism from US officials regarding the weekend’s announced US-China temporary trade truce made investors seek high-yield risk currencies on Monday afternoon.

The risl-correlated New Zealand Dollar (NZD) was more appealing to investors and the currency easily capitalised on a Brexit-battered Sterling (GBP).

GBP/NZD was trending near a new 2018 low at the time of writing, and the pair’s worst levels since September 2017.

Continued criticism of UK Prime Minister Theresa May’s Brexit plan from MPs has left investors jittery, and the Pound looking unappealing.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Trading near Worst Levels

Despite some stronger-than-expected UK ecostats on Monday, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate floundered near its worst levels all year as investors reacted to trade developments between the US and China.

Due to rising demand for trade-correlated currencies, the New Zealand Dollar (NZD) climbed last week and dragged GBP/NZD around three cents lower.

When markets opened on Monday morning, GBP/NZD touched on a new 2018 low – and the worst level since October 2017.

While the New Zealand Dollar rally slowed as it neared its best levels in months against major rivals like the Pound and US Dollar (USD), some analysts believe it may have further to climb.

Good UK Manufacturing Figures Fail to Prevent Pound (GBP) Exchange Rate Losses

Trade-correlated currencies easily pushed the Brexit-battered Pound (GBP) lower on Monday morning, as a fresh lack of supportive UK news left the British currency sensitive to movement in rivals.

In recent weeks, the Pound’s strength has been undermined by broad market fears that the long-negotiated UK-EU Brexit deal could be blocked completely by Parliament – which may lead to a worst-case scenario no-deal Brexit.

A lack of perceived support for the UK Prime Minister’s Brexit plan among both her opposition and even within her own ally parties has worsened Brexit uncertainties and fears.

Monday morning’s UK November manufacturing PMIs beat expectations, but the report was not enough to prevent GBP/NZD losses.

UK manufacturing was expected to have edged higher from 51.1 to 51.5 in November, but instead climbed to 53.1. Rob Dobson, Director at IHS Markit, noted that the manufacturing sector was still generally pessimistic despite this rise:

‘Brexit worries also increasingly dominated the outlook for the sector. Although still forecasting growth for the year ahead, manufacturers’ confidence fell to its lowest ebb since August 2016.’

New Zealand Dollar (NZD) Bolstered by Surge in Risk-Sentiment

Over the weekend, the US and China finally agreed to a temporary truce in its ongoing trade feud during the G20 summit in Argentina.

While some kind of progress in trade talks was already expected, news of a 90-day period without further escalations so the US and China could focus on negotiations led to further market demand for riskier trade-correlated currencies like the New Zealand Dollar.

If markets remain optimistic about de-escalations, the New Zealand Dollar may have further to climb. According to Jason Wong from Bank of New Zealand:

‘The US-China trade war has been a key driver of markets for much of this year and a de-escalation of tension sets the scene for a broadly-based rally in risk assets,

We will have to revise our NZD forecasts higher.’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rates Focused on Brexit and Trade Developments

There is still little reason for investors to buy the Pound (GBP) this week so far, with Brexit uncertainties keeping a lid on the British currency’s appeal.

As a result, even as the New Zealand Dollar (NZD) is trending near its best levels since last year, it may have even further to rise – depending on US-China trade tensions.

The 90-day truce in the trade row between the US and China is of course in its early-days, but some analysts remain concerned that the nations will be unable to reach an agreement.

For now, investors are happier to take risks and buy risk-correlated currencies like the New Zealand Dollar. However, the currency’s rally may not last long if fresh trade uncertainties become apparent.

The New Zealand Dollar is still a commodity-correlated currency, so its strength may be limited if Tuesday’s Global Dairy Trade (GDT) report disappoints.

Sterling may be influenced slightly by Wednesday’s UK services PMI, but overall the Pound to New Zealand Dollar (GBP/NZD) exchange rate outlook is likely to depend on Brexit developments and US-China trade negotiations.

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