Brexit Fear Keeps Pound to New Zealand Dollar (GBP/NZD) Exchange Rate from Recovering

Pound to New Zealand Dollar Exchange Rate Sheds Gains despite Federal Reserve Hawkishness

This week’s Brexit and central bank news has led to mixed movement in the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate, as the New Zealand Dollar (NZD) climbed against rivals despite last night’s Federal Reserve news.

Since opening this week at the interbank level of 1.86, GBP/NZD has seen significant losses. GBP/NZD briefly touched a low of 1.82 on Tuesday, which was the worst level for the pair since December 2018.

While GBP/NZD has recovered from those lows, the pair has only climbed to around the interbank level of 1.84, still well below the week’s opening levels.

GBP/NZD continued to weaken today as the New Zealand Dollar gained, but investors will be hesitant to move too much on the New Zealand Dollar ahead of next week’s anticipated Reserve Bank of New Zealand (RBNZ) policy decision.

Pound (GBP) Exchange Rates Fail to Recover Further despite Lighter Manufacturing Contraction

In the middle of the week, investors opted to buy the Brexit-battered Pound (GBP) from its worst levels in months against many major rivals including the New Zealand Dollar (NZD).

This was due to a combination of factors, including profit-taking from its cheapest levels, as well as month-end fixings, and anticipation for today’s Bank of England (BoE) policy decision.

Still, overall the Pound’s potential for recovery was limited, and the British currency was weakening again today.

Fears regarding how Prime Minister Boris Johnson’s government could handle Brexit going forward continue to dominate the British currency’s outlook, and the latest UK data has done little to make Sterling more appealing either.

This morning saw the publication of Britain’s July manufacturing PMI from Markit. While the data came in with a slightly better than expected figure of 48.0, the contraction still weighed on the Pound outlook overall.

New Zealand Dollar (NZD) Exchange Rates Up Despite Federal Reserve Hawkishness

While the Federal Reserve took a more hawkish tone than expected in regards to the US economic outlook, and indicated that its new interest rate cut was not indicative of a new rate cut cycle, the New Zealand Dollar (NZD) has advanced.

Typically, currencies correlated to trade and market risk sentiment like the New Zealand Dollar weaken in response to Federal Reserve hawkishness and a stronger US Dollar.

However, ultimately the Federal Reserve decision didn’t impact the New Zealand Dollar outlook much.

The New Zealand Dollar climbed against a weak Pound today. Market anticipation for next week’s Reserve Bank of New Zealand (RBNZ) policy decision kept the ‘Kiwi’ steady.

On top of this, the New Zealand Dollar benefitted from slightly stronger than expected Chinese manufacturing PMI data. China is an important trade partner for New Zealand, so this data bolstered the New Zealand trade outlook.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Awaits Central Bank News

The Pound (GBP) outlook continues to be weighed significantly by fears that Britain’s new government will aim for a no-deal Brexit, but for now investors are anticipating the Bank of England’s (BoE) August policy decision today.

The bank is not expected to be making any change to UK monetary policy, but any shift in tone from the bank on UK politics could be hugely influential for Sterling.

Since the bank’s last policy decision, Boris Johnson became Prime Minister and his government continues to play up the possibility of a no-deal Brexit.

BoE news aside, Brexit news and New Zealand data is most likely to influence GBP/NZD towards the end of the week and early next week.

New Zealand’s July consumer confidence data from ANZ will be published overnight, and next week’s key New Zealand job market report and Reserve Bank of New Zealand (RBNZ) policy decision could also strongly influence the Pound to New Zealand Dollar (GBP/NZD) exchange rate.

Josh Jeffery

Contact Josh Jeffery