Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises as MPs Vote Against No-Deal
UPDATE: The Pound New Zealand Dollar (GBP/NZD) exchange rate rallied overnight following the vote in the House of Commons yesterday.
The pairing is currently trading at an inter-bank rate of NZ$1.9412.
MPs voted to reject a no-deal under any circumstances, which buoyed Sterling overnight as the risk of a no-deal plummeted.
The government’s original motion that stated the UK should not leave the EU without a deal on 29 March was changed at the last minute.
In the second vote, MPs reinforced that decision by 321 to 278.
This amendment stated that while the UK could not leave the EU on the 29 March without a deal, the country could still leave the bloc without a deal at another time.
However, as the vote is not legally binding under current UK law, the country could still leave the EU on 29 March without a deal.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Rises despite OBR Slashing Growth Forecasts
UPDATE: The Pound New Zealand Dollar (GBP/NZD) exchange rate rose by around 1.2% this afternoon.
The pairing is currently trading at an inter-bank rate of NZ$1.1.9290.
During his Spring Statement, UK Chancellor Philip Hammond pledged to spend a £26.6bn Brexit war chest to prop-up the economy if MPs vote in favour of a no-deal Brexit.
Hammond also warned that a disorderly Brexit would cause a ‘significant’ blow to the economy in the short term.
He also vowed to free up more money in order to cut taxes and spend more on public services in a ‘deal dividend’.
However, the Office for Budget Responsibility (OBR) slashed its 2019 growth forecast from 1.6% to 1.2%, the weakest growth since 2009, although this has been labelled as a temporary slowdown.
Pound New Zealand Dollar (GBP/NZD) Exchange Rate Jumps as Investors Anticipate Article 50 Extension
This morning, the Pound New Zealand Dollar (GBP/NZD) exchange rate rose by around 0.9%, with the pairing currently trading at an inter-bank rate of NZ$1.9231.
The Pound (GBP) is being buoyed by investors’ expectation that a no-deal Brexit is likely to be avoided as MPs are expected to vote against leaving the European Union in 16 days without a deal.
Last night, Prime Minister Theresa May’s EU withdrawal agreement was rejected by the House of Commons by 391 to 242 votes.
Although the margin was lower than the first vote, markets are considering it likely that the UK will request to stay in the EU a little longer.
However, the UK must provide the EU with a ‘credible justification’ before they will agree to an extension of Article 50.
New Zealand Dollar (NZD) Slides as Butter Prices Slump to 19-Month Low
The New Zealand Food Price Index rose by 0.4% in February, and after seasonally adjusting these figures, food prices rose by 0.7%.
Following this, the New Zealand Dollar (NZD) slipped against the Pound (GBP).
The data found that the price of butter slumped by 10% to $5.20, falling to a 19-month low after a record high of $5.79 in January.
New Zealand’s Global Dairy Trade Index slipped between June and November, which has caused the drop in dairy prices.
Commenting on this, Consumer Prices Manager Gael Price said:
‘In January we saw milk prices fall to a 19-month low. This price fall now looks to be flowing on to other dairy products.
‘In February 2019 prices fell for cheese (down 4.1%), yoghurt (down 6.7%), and milk (down 0.2%).
‘The lower international prices appear to have passed on to New Zealand consumers, with the usual lag of a few months.’
Yesterday: Pound (GBP) Rises despite ‘Sluggish’ GDP Growth
A report from the Office of National Statistics (ONS) showed that January’s UK GDP picked up, meaning the economy expanded by 0.5%.
This better-than-expected rise in GDP came after December’s contraction of -0.4%.
However, in the three months leading up to January the economy only expanded by 0.2%, on average.
Commenting on this data, Rob Kent-Smith, Head of GDP at the ONS said:
‘Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services.
‘This sluggish growth came despite the economy bouncing back from a weak December.’
Pound New Zealand Dollar Outlook: Will the GBP/NZD Exchange Rate Rise if No-Deal Risk Removed?
The Pound (GBP) could slide against the New Zealand Dollar (NZD) later in the session following the UK Chancellor of the Exchequer Phillip Hammond’s Spring Statement, due at lunchtime.
While a no-deal Brexit seems to be unlikely, if Hammond mentions the potential impact of a no-deal, it could cause the Pound to slip.
The UK vote on a no-deal Brexit is also due to occur this evening, with MPs expected to opt in favour of ruling out the scenario.
If MPs vote against a no-deal it is likely that this will buoy Sterling.
Looking ahead to late Thursday evening, the New Zealand Dollar could rise against the Pound following the release of the Business NZ PMI.
If February’s PMI shows faster growth in the business sector, it could cause the Pound New Zealand Dollar (GBP/NZD) exchange rate to slide.