Pound New Zealand Dollar (GBP/NZD) Exchange Rate Steadies as ‘Malthouse Compromise’ Unsettles Brexit Optimism

GBP/NZD Exchange Rate Rangebound as New Zealand Dollar hit by Increased Risk Aversion

UPDATE: The Pound (GBP) has failed to make any gains on the New Zealand Dollar (NZD) today after the announcement of the ‘Malthouse Compromise’ Brexit amendment which aims to address the Irish backstop issue while potentially extending Article 50 into 2021.

This has irked some Sterling traders, however, over fears that it would increase the likelihood of a no-deal.

The New Zealand Dollar has continued to suffer today on increasing risk aversion as tensions spark up between the Canada and China after Canadian President Justin Trudeau fired John McCallum, the now former Canadian Ambassador to China.

This came following McCallum’s comments made about the extradition of Chinese tech giant Huawei’s Chief Financial Officer.

GBP/NZD Exchange Rate Drops as Irish Backstop In Focus for Brexit Vote

The Pound New Zealand Dollar (GBP/NZD) is down today and is currently trading within the region of NZ$1.9211 on the inter-bank market.

Sterling (GBP) has fallen against the New Zealand Dollar (NZD) on increasing concerns over Theresa May’s Brexit ‘Plan B’ ahead of Tuesday’s parliamentary vote, with fears that the deal may be rejected continuing to dampen sentiment in Sterling.

Many Pound traders are concerned about the Irish backstop – which remains a crucial aspect of the Brexit withdrawal agreement – and if May can secure what Boris Johnson has called the ‘freedom clause’ for Ireland, many feel that ‘Plan B’ could successfully pass through Parliament.

Sir Graham Brady, a senior Conservative backbencher who tabled an amendment to avoid a hard border for Ireland, commented:

‘I’m hoping that the way in which the amendment is crafted can attract that very broad support. And if we can win the vote on my amendment, then I think it gives the prime minister enormous firepower when she goes back. . . If my amendment is carried, she goes back to Brussels and says: you wanted to know what we can get through the House of Commons? This is it.’

NZD/GBP Exchange Rate Rises on Positive New Zealand Trade Balance Data Expectations

New Zealand Dollar traders will be looking ahead to the publication of New Zealand’s trade balance figures for December later today, which are expected to be the first positive figures since June 2018.

NZD has held onto some of its gains from last week, with the partial US government shutdown having caused many traders to flee to other currencies.

As the US government has reopened today, however, the ‘Kiwi’ is beginning to shed some of these gains as the US Dollar once again slowly reclaims its safe-haven status.

The ‘Kiwi’, however, has had some of its gains curbed after the publication of China’s industrial profits figures for December today, which fell to 10.3% – and with China being New Zealand’s biggest trading partner this has dampened NZD sentiment.

Tang Jianwei, a senior economist at China’s Bank of Communications, commented:

‘As far as the future trend is concerned, it is quite obvious that it will continue to decline because the [PPI] turned negative last month, and when PPI has turned negative, the profits of industrial enterprises will go down.’

GBP/NZD Outlook: Tuesday Brexit ‘Plan B’ Parliamentary Vote in Focus

Pound investors will be looking to the UK Parliament tomorrow with the vote on Theresa May’s Brexit ‘Plan B’ to determine the GBP/NZD exchange rate.

GBP traders will be almost solely occupied by Brexit news until after Tuesday, with no notable UK data releases until Wednesday, which will see the publication of the UK mortgage approvals figures for December.

NZD investors, meanwhile, will be looking further ahead to Thursday with the publication of China’s NBS manufacturing PMI figures for January, which is expected to decrease, potentially knocking the NZD/GBP exchange rate on signs of a further weakening Chinese economy.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron