GBP/NZD Gains as Risk-Off Mood Prevails

GBP/NZD Exchange Rate Climbs as Risk Appetite Weakens

UPDATE: The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate jumped over a cent on Wednesday as the pairing advanced in the face of sliding market risk appetite.

This comes as US-China trade tensions began to flare once again, this time driven by Beijing’s threat to restrict rare earth metal exports to the US.

However the pairing gains were tempered somewhat by the ongoing political uncertainty in the UK, with analysts warning the risks of a no-deal Brexit are rising as it looks increasingly likely that the new PM will be a Brexiteer.

GBP/NZD Exchange Rate Subdued as UK Political Uncertainties Drag

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is trading in a neutral range this morning with markets remaining wary of the UK political landscape as the race to replace the PM gets underway.

At the time of writing the GBP/NZD exchange rate is trading at around NZ$1.9387, with the pairing edging away from a two-month low.

Pound (GBP) Muted as Political Uncertainty on the Rise

The Pound (GBP) is rangebound against the New Zealand Dollar (NZD) and most of its other peers this morning as markets remain focused on UK politics.

As the opening salvos in the race to replace Theresa May as Prime Minister are fired, investors are unsurprisingly adopting a cautious approach in regards to Sterling.

So far there has been a split between candidates calling for the UK to leave the EU in October with or without a deal and those who insist a no-deal Brexit is not an option.

UK Health Minister Matt Hancock, who is in the running for PM said:

‘The brutal reality is, no deal is not a policy choice available to the next prime minister.‘

However no candidate so far has come out as avowedly pro-EU, something that will disappoint any GBP investors who may be holding out hopes that the next PM could hold a second referendum or even cancel Brexit.

New Zealand Dollar (NZD) Flat Following RBNZ Stability Review

Meanwhile, the New Zealand Dollar (NZD) was left subdued throughout the Asian session on Wednesday following the publication of the Reserve Bank of New Zealand’s (RBNZ) bi-annual financial stability review.

NZD exchange rates were largely unfazed by the publication of the review as it reported that household risks remains more or less unchanged since the last release six months ago.

However, while the review spoke of the resilience of the country’s financial system it did also warn that some risks remained.

Speaking to the Parliament Select Committee, RBNZ Governor Adrian Orr said:

‘The New Zealand financial system remains resilient to a broad range of economic risks. However, financial system risks remain elevated, and ongoing effort is necessary to bolster system soundness and efficiency.’

This was largely in line with what was said earlier this month as the RBNZ cited global risks to New Zealand’s economy as it cut interest rates for the first time in over two years.

GBP/NZD Exchange Rate Forecast: Sterling to Remain Subdued as Leadership Race Heats Up?

Looking ahead, the Pound New Zealand Dollar (GBP/NZD) exchange rate is likely to continue to trade sideways in the coming days as the Tory leadership race remains in focus, with heightened political uncertainty in the UK likely to cap any upside in Sterling.

Meanwhile the focus for NZD investors will be on the publication of New Zealand’s budget on Thursday.

This may see the ‘Kiwi’ weaken in the latter half of the week as reports suggest it will focus spending less on areas for economic growth and instead prioritise ‘wellbeing’ issues such as poverty and mental health.

Matthew Andrews

Contact Matthew Andrews