Pound New Zealand Dollar (GBP/NZD) Exchange Rate Losses Limited as Risk-Aversion Trips up ‘Kiwi’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Sustains Gains despite Brexit Jitters

While the Pound (GBP) saw significant losses against most major currency rivals on the back of fresh Brexit jitters over the past week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate’s losses have been fairly limited overall.

Instead, since opening this week at the interbank level of NZ$1.98, GBP/NZD has barely lost a single cent throughout the week. Compared to the previous week’s impressive gains of over four cents, the latest losses were comparatively modest.

Still, the Pound’s (GBP) latest Brexit jitters did ultimately leave it the loser this week, but the New Zealand Dollar (NZD) has been one of its worst-performing major rivals.

Investors have been hesitant to buy NZD since the Reserve Bank of New Zealand (RBNZ) cut interest rates, and trade-correlated currencies became unappealing due to the latest US-China trade tensions.

Pound (GBP) Exchange Rates Slump as Hopes for Brexit Deal Unravel

The Pound’s recent strength has been driven by hopes that the UK government could reach some kind of solution to its Brexit deadlock by holding cross-party negotiations.

This also means that as investors increasingly expect talks to be unsuccessful and collapse, the Pound has shed many of the gains in response to those hopes.

Britain’s ruling Conservative Party confirmed that Britain would be taking part in EU elections, and since then it and the opposition Labour Party have been focused on the upcoming elections rather than cross-party talks.

Analysts were already forecasting the talks would fail and that Brexit uncertainty would last for months to come.

As investors find this outlook more likely, the Pound’s potential for gains has fallen and the British currency became one of the week’s worst performing major currencies.

New Zealand Dollar (NZD) Exchange Rates Fail to Capitalise on Rival Weakness

The New Zealand Dollar (NZD), on the other hand, was one of the week’s worst performing major currencies. This meant that it was unable to climb too much, despite the Pound plummeting.

Investors were already anxious about the New Zealand Dollar’s outlook when markets opened on Monday in anticipation of what was expected to be a dovish policy decision from the RBNZ on Wednesday.

As expected, the RBNZ cut interest rates to 1.50% after years of holding them frozen. This was due to worsening concerns about the global economic slowdown hitting New Zealand’s economy.

Since then, US-China trade tensions have worsened. As China and New Zealand have strong trade ties, this put even further pressure on NZD.

This morning’s New Zealand electronic retail card spending stats were mixed and offered the unappealing ‘Kiwi’ little in the way of support.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Focus on Political News

Next week’s economic calendar will be a little quieter, so while the New Zealand economic outlook could still be influenced by Friday’s business PMI, the Pound to New Zealand Dollar (GBP/NZD) exchange rate is most likely to focus on other factors.

The Pound (GBP), meanwhile, will likely continue to be driven by shifts in Brexit speculation. As the EU elections approach and UK political parties focus on this, concerns of further political instability could keep Sterling under pressure.

The New Zealand Dollar, on the other hand, will be influenced by developments in US-China trade negotiations.

While tensions between the US and China have worsened again lately, talks are expected to continue even though the nations are implementing more protectionist trade action against one another.

If there are any positive developments between the nations or tensions diminish, demand for the trade-correlated ‘Kiwi’ will improve and the Pound to New Zealand Dollar (GBP/NZD) exchange rate will fall.

Matthew Andrews

Contact Matthew Andrews