Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Benefits from NZD Weakness
Despite a lack of certainty over how the Brexit process will unfold with just over a week until the EU’s current Brexit deadline date, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is trending relatively closely to its best 2019 levels.
Since opening this week at the interbank level of NZ$1.91, GBP/NZD has seen a surge in demand due to a combination of Brexit hopes and New Zealand Dollar (NZD) weakness.
At its best point, GBP/NZD was trending almost three cents higher, but at the time of writing the pair was still trending over two cents higher despite having slipped slightly from yesterday’s highs.
This put GBP/NZD less than a cent below last week’s high.
Investors continued to find the Pound (GBP) appealing due to greater hopes that the UK will be able to avoid Pound-negative outcomes like a general election or no-deal Brexit.
Pound (GBP) Exchange Rates Firm on Hopes for No-Deal Brexit being Blocked by Law
Last week, investors sold the Pound as the UK Parliament failed to find a way forward for the Brexit process, leading to brief concerns that the process could end in a no-deal Brexit on 12 April.
Since then though, despite a lack of solid developments and direction for the Brexit process and just over one week until the 12th, the Pound (GBP) has seen stronger demand.
The current big downside risks for the Pound include the possibility of a no-deal Brexit, as well as a possible general election.
Additional uncertainty surrounding Britain’s leadership would leave the Pound highly unappealing, even if a no-deal Brexit is avoided, as it would ultimately influence how future Brexit negotiations unfold.
Due to these concerns, Pound investors were relieved this week that Parliament had voted to pass a bill to prevent a no-deal Brexit. The bill just barely passed by one vote, and will go on to the House of Lords.
On top of this, talks between Prime Minister Theresa May and opposition Leader Jeremy Corbyn are being described as ‘constructive’, which is keeping the Pound buoyed.
New Zealand Dollar (NZD) Exchange Rate Lacks Drive as Investors Await Trade News
The New Zealand Dollar (NZD) has been less appealing since last week, when the Reserve Bank of New Zealand (RBNZ) indicated it may need to cut interest rates sometime soon.
A lack of notable supportive New Zealand data since then has left the NZD weak, with investors having little reason to buy the currency compared to more appealing rivals like the Australian Dollar (AUD).
RBNZ interest rate cut bets remain high, with analysts predicting the bank could be prepared to cut rates as soon as the next few months.
While there has been a small boost due to hopes for a US-China trade resolution this week, this has benefitted other risky currencies like AUD more than NZD.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Focus on Brexit
The Pound (GBP) has been able to easily hold its ground versus a weak New Zealand Dollar (NZD) this week so far, but the New Zealand Dollar’s appeal is unlikely to shift much in the coming sessions amid a lack of notable New Zealand data.
With NZD investors anticipating more news on the global growth slowdown and US-China trade negotiations, GBP/NZD is more likely to be driven by potential Brexit developments towards the end of the week.
A Parliament bill to avoid a no-deal Brexit is set to be debated and voted on in the House of Lords. While markets are uncertain if it will pass or not, it would be Pound-positive if it succeeded.
If the bill succeeds, it would mean that avoiding a no-deal Brexit is enforceable by law, which would force the government to take other options over allowing a no-deal Brexit to unfold. If it fails, the Pound may not be influenced too much however.
Sterling investors are also anticipating further talks between Prime Minister May and opposition Leader Corbyn, in hopes that a compromise could lead to a softer Brexit.
With the EU’s current Brexit date still the 12th of April, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is still likely to remain focused on Brexit developments next week.