Pound Sterling to New Zealand Dollar Exchange Rate Trends Nearer Weekly Lows

Pound to New Zealand Dollar Exchange Rate Slides Ahead of New Zealand Growth Report

UPDATE: Despite a brief recovery attempt on Tuesday, the Pound to New Zealand Dollar (GBP/NZD) exchange rate had slipped back towards its weekly lows at the time of writing on Wednesday. GBP/NZD is trending over a cent below the week’s opening levels at an inter-bank rate of NZ$1.84.

Demand for the New Zealand Dollar (NZD) remains solid despite weaker commodity trade and mixed demand for riskier currencies.

This is due to market reaction to this week’s New Zealand business and consumer confidence figures, which both came in well above expectations.

Investors are now anticipating New Zealand’s Q3 growth results, due to be published overnight.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Slips Ahead of Federal Reserve Policy Decision

After holding its ground for most of Monday’s session, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate tumbled on Tuesday. Sterling (GBP) was unable to hold against the New Zealand Dollar (NZD), which benefitted from domestic and global news.

Last week was a volatile week for the GBP/NZD pairing. GBP/NZD briefly touched on its worst 2018 levels in the middle of the week, but ultimately recovered over three cents and ended the week near the inter-bank level of NZ$1.85.

Today, GBP/NZD has slipped around a cent due to New Zealand Dollar strength, but the pair still remains well above last week’s worst levels.

Demand for the Pound has been limited due to uncertainties about how the Brexit process will proceed. As the New Zealand Dollar saw a jump in demand on Tuesday, this meant GBP/NZD saw easy losses.

Pound (GBP) Exchange Rates Fail to Hold as Brexit Uncertainties Persist

A lack of supportive UK news in recent sessions, combined with fears that Brexit issues are not being resolved, left the Pound (GBP) unappealing this week so far.

Sterling’s limp performance made it easy for a resurgent New Zealand Dollar (NZD) to push GBP/NZD lower.

On Monday, UK Prime Minister Theresa May announced that parliamentary debate over her negotiated UK-EU withdrawal plan would resume in January, with a vote planned for 14 January.

Tuesday saw the UK government debate the ramping up of preparations for a potential no-deal Brexit.

On top of this, the EU has indicated it will not support a so-called ‘managed no-deal Brexit’ – that is, a ‘no-deal Brexit’ in which the EU assists the UK slightly to mitigate potential shock.

These factors may serve to make Theresa May’s Brexit deal more appealing in comparison. However, this news has not been enough to bolster the pound.

New Zealand Dollar (NZD) Demand Jumps in Reaction to Rising Business Confidence

New Zealand business confidence came in much higher than expected in December, according to ANZ’s latest New Zealand business confidence survey.

The print was expected to lighten slightly from the November figure of -37.1, but instead notably softened to -24.1. According to Tim Kelleher, Head of Institutional Foreign Exchange Sales at ASB Bank:

‘The market was short Kiwi and the sentiment survey has upset the apple cart slightly because it was better than expected,’

The business confidence report played a large part in making the New Zealand Dollar (NZD) one of the best performing risk-correlated currencies on Tuesday morning, but the currency also benefitted from weakness in the US Dollar (USD).

Global markets expect the Federal Reserve to hike US interest rates at its December policy meeting this week, but expectations that the Fed’s 2019 outlook will be much more cautious or dovish is weighing heavily on the US Dollar.

With investors speculating that US monetary policy could be about to cool, riskier trade-correlated currencies like the New Zealand Dollar became more appealing.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Anticipate Federal Reserve and New Zealand Growth

Wednesday night could be pivotal for the Pound to New Zealand Dollar (GBP/NZD) exchange rate, as the Federal Reserve will hold its December policy decision, followed by key New Zealand data coming in during Thursday’s Asian session.

The day’s UK inflation data could cause some Pound (GBP) movement if it surprises investors, but unless it has some kind of influence on market expectations it’s more likely that UK politics and the Brexit process will remain the biggest influence for Sterling.

The Federal Reserve is widely expected to hike interest rates, but markets will be focused on the tone the bank takes regarding the 2019 outlook.

If the bank indicates that 2019 interest rate hikes depend heavily on US data, Fed interest rate hike bets would weaken, which would bolster risk-sentiment and make the New Zealand Dollar (NZD) more appealing.

Of course, if New Zealand’s Q3 Gross Domestic Product (GDP) growth rate stats surprise investors during Thursday’s Asian session this could also cause some Pound to New Zealand Dollar (GBP/NZD) exchange rate movement.

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