Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Softens as Parliament Set for Further Brexit Votes

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rate Fails to Benefit from Brexit Extension Vote

After MPs voted to seek an extension of the Brexit deadline the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate remained under pressure.

Although an extended deadline appears to reduce the risk of the UK crashing out of the EU without a deal before the end of the month this was not enough to encourage investors.

As the EU still needs to approve a delay and a mutually agreeable deal remains elusive the mood towards Pound Sterling (GBP) remained muted.

Markets were not enthused by the prospect of Theresa May bringing her Brexit deal before Parliament again for a third so-called meaningful vote.

Until investors see signs of concrete progress towards a satisfactory Brexit resolution the GBP/NZD exchange rate is unlikely to return to its recent highs.

Market Risk Aversion Puts New Zealand Dollar (NZD) Under Pressure

Demand for the New Zealand Dollar (NZD), meanwhile, proved limited as a general sense of market risk aversion weighed on sentiment.

With the US-China trade dispute still lacking resolution the appeal of the risk-sensitive NZD has naturally diminished.

Last night’s manufacturing PMI failed to give NZD exchange rates any significant boost, even though the sector continued to show solid expansion on the month.

As worries over the economic outlook persist the New Zealand Dollar struggled to capitalise on the softness of Pound Sterling.

GBP/NZD Exchange Rate Remains Vulnerable amid Brexit Developments

Ahead of the next mooted vote on Theresa May’s Brexit deal the mood towards the Pound looks unlikely to see any particular improvement.

A persistent lack of clarity over the UK’s future relationship with the EU is likely to continue weighing on business sentiment and economic activity for the foreseeable future.

Tuesday’s UK labour market and wage data could offer the GBP/NZD exchange rate a fresh rallying point, however.

Evidence of steady wage growth would encourage greater confidence in the resilience of UK households, especially in the face of easing inflationary pressure.

If average weekly earnings fail to accelerate in January, though, the Pound looks vulnerable to further selling pressure.

New Zealand Dollar (NZD) Seeks Support from Services PMI

Sunday’s New Zealand services PMI may offer a boost to the New Zealand Dollar, meanwhile, if the sector continues to demonstrate bullish growth.

As long as the PMI shows little change from the reading of 56.3 seen in January NZD exchange rates are likely to benefit, with a stronger service sector boding well for the wider economy.

Any signs of a slowdown, on the other hand, could weigh heavily on the New Zealand Dollar as investors continue to weigh up the likely monetary policy course of the Reserve Bank of New Zealand (RBNZ).

A stronger US Dollar (USD) and persistent worries over the global growth outlook may also keep the antipodean currency under pressure in the days ahead.

Even so, ongoing speculation over Brexit is likely to limit any potential GBP/NZD exchange rate gains for the time being.

Louisa Heath

Contact Louisa Heath