Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Rebounds from 2018 Lows Despite Trade Hopes

Pound to New Zealand Dollar Exchange Rate Climbs on Hopes for UK Government Stability and RBNZ Uncertainties

UPDATE: It’s been another volatile day for the Pound (GBP), but the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate ended up surging on Wednesday afternoon despite persisting Brexit uncertainties.

In the morning, UK Conservative Party MPs sent enough letters of no-confidence in the UK Prime Minister to trigger a no-confidence vote.

However, Sterling climbed as reports emerged suggesting that Prime Minister Theresa May was likely to win any contest against her.

This helped the Pound to capitalise on New Zealand Dollar (NZD) weakness, as the risk-sensitive currency was dumped following reports that the Reserve Bank of New Zealand was still under-funded and under-resourced.

Pound to New Zealand Dollar Exchange Rate Sheds Morning Gains and Trends Near Lows

UPDATE: Amid a lack of fresh Brexit progress, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate gave up its recovery rally attempts on signs that US-China trade negotiations were progressing.

The risk-sensitive New Zealand Dollar (NZD), which benefits from optimistic global trade news, became more appealing to investors following fresh comments from US President Donald Trump.

Trump tweeted that there would be some important announcements regarding US-China trade negotiation, making investors more optimistic following last week’s tensions.

Pound to New Zealand Dollar Exchange Rate (GBP?NZD) Recovery Limited as Brexit Fears Persist

The New Zealand Dollar (NZD) has benefitted strongly from Pound (GBP) weakness this week so far, as risk-sentiment helped the risk-correlated currency briefly push the Pound to New Zealand Dollar (GBP/NZD) exchange rate down to its worst 2018 levels.

While GBP/NZD ultimately edged higher last week, the pair has lost around two cents this week already. On Monday, GBP/NZD plummeted over three cents and touched and inter-bank low of NZ€1.81 for the first time since September 2017.

GBP/NZD quickly rebounded from that low however, and its recovery attempt continued on Tuesday morning.

The pair’s recovery was limited though, as the Brexit fears that knocked Sterling on Monday persisted and market risk-sentiment improved slightly.

While concerns about US-China trade tensions persist, hopes that the nations are still committed to negotiate through the announced trade truce period bolstered market demand for risk-on currencies like NZD.

Pound (GBP) Exchange Rates Recovery Limited despite Strong UK Job Stats

Monday was a turbulent day for markets and particularly the Pound (GBP), as UK Prime Minister Theresa May announced her intention to delay an anticipated parliamentary vote on her Brexit deal.

The delay was announced so May could get additional assurances from the EU in the hopes it would make her negotiated deal more popular and help it to pass through Parliament successfully.

Sterling, however, plummeted as the chances of any clarity on Brexit were delayed further, with Monday’s events worsening the perceived stability and reliability of the UK government.

Fears of further UK political instability, such as a possible ‘no-confidence’ vote or a leadership challenge, weighed heavily on Sterling.

The British currency recovered slightly today on hopes that a ‘no-deal Brexit’ could still be avoided, and was supported slightly by the day’s stronger-than-expected UK jobs market report.

New Zealand Dollar (NZD) Exchange Rates Mixed on Risk-Sentiment

Risk-sentiment has improved slightly this week, following last week’s worsening US-China trade tensions, and as a result demand for the risk-correlated New Zealand Dollar (NZD) has improved.

This, coupled with broad US Dollar (USD) weakness, made it easier for the New Zealand Dollar to surge versus the Pound (GBP) on Monday.

Analysts noted that the New Zealand Dollar’s resilience this week so far has been surprising. According to Ross Weston, Head of Trading at Kiwibank:

‘Given the multitude of risks out there, you would expect it to be lower,

That might have something to do with New Zealand’s relatively good fiscal state or the fact that things are just bubbling along.’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Recovery Unlikely Without Brexit Clarification

The Pound to New Zealand Dollar (GBP/NZD) exchange rate’s Tuesday rebound was minor compared to the losses it saw on Monday, and unless there is some optimistic Brexit news soon the pairing may not recover much higher.

Sterling (GBP) will remain widely unappealing as Brexit uncertainties remain in market focus.

If Theresa May is able to acquire assurances on her Brexit deal and announce a new Parliament vote sooner rather than later, the Pound is more likely to recover.

Any sign, however, that the UK government could face a leadership challenge or no-confidence vote could deepen the Pound selloff.

With Brexit developments in sharp focus and upcoming UK and New Zealand data unlikely to be particularly influential, GBP/NZD could be dragged more by Sterling movement this week.

However, any major shifts in market risk-sentiment or commodity strength could also influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate.

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