Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Slips despite Bearish New Zealand Outlook

Pound to New Zealand Dollar Exchange Rate Slides on Latest UK and US Data

Despite the New Zealand Dollar (NZD) seeing fresh pressure from a more dovish Reserve Bank of Australia (RBA) this week, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has been sliding today.

Since opening this week at the interbank level of 1.95, GBP/NZD has trended with an upside bias and on Tuesday briefly hit a high of 1.97.

GBP/NZD has since fallen back from that high though and continues to slowly shed its weekly gains today.

At the time of writing the pair was still up on the week’s opening levels, but trended close to the interbank level of 1.95 again.

Pound (GBP) Exchange Rates Unappealing amid Data and Brexit Jitters

The Pound (GBP) has been unable to find much in the way of notable support in recent sessions, as both political and economic news leaves investors anxious about Britain’s outlook.

UK Prime Minister Boris Johnson discussed his final Brexit offer yesterday, proposing that there could be border checks in the Irish Sea rather than at the Irish border as an alternative to the contentious backstop.

However, analysts and EU sources have indicated that such a proposal is unlikely to be met with enthusiasm from EU negotiators.

As Johnson has said he could aim for a no-deal Brexit if the EU does not work with his proposals, this is keeping no-deal Brexit fears alive.

On top of Brexit jitters, the Pound was weighed by a surprise contraction in UK services PMI data today. The figure fell to 49.5 rather than the expected 50.3, and caused recession speculation to return.

New Zealand Dollar (NZD) Exchange Rate Climbs amid Weakness in Rivals

The New Zealand Dollar (NZD) exchange rate weakened at the beginning of the week, as the Reserve Bank of Australia (RBA) took a more dovish tone on Australian monetary policy than expected, and US-China trade tensions persisted.

The New Zealand Dollar is a trade-correlated currency that has been unappealing amid expectations for weaker economic performance in close trade partners like Australia and China.

Still, the New Zealand Dollar has been recovering from its early-week slump in recent sessions. Today, the New Zealand Dollar was one of the stronger major currencies versus Sterling (GBP).

This has been due to weakness in rival currencies, like the US Dollar (USD). Federal Reserve interest rate cut speculation has been rising amid poor US data this week, which has softened concerns about falling New Zealand interest rates and left NZD gaining on USD.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Investors Await Political Developments

The Pound’s (GBP) movement remains narrow, as this week’s UK data has been underwhelming and has been largely overshadowed by Brexit speculation.

Markets still generally expect the Brexit process will be delayed again, but anxiety about the possibility of a no-deal Brexit is certainly persisting as well.

If UK Parliament or the EU have a negative response to Prime Minister Boris Johnson’s Brexit plans, no-deal Brexit fears are likely to remain as the government has shown a hesitance to delay Brexit again.

On the other hand, while analysts believe it is unlikely, an optimistic reaction to the Brexit plan would lead to fresh gains for Sterling as softer Brexit hopes would rise.

While politics will drive the Pound, a lack of New Zealand data due in the coming sessions means New Zealand Dollar (NZD) investors will be carefully watching US data.

As US job stats disappointed investors yesterday, a disappointing US Non-Farm Payroll report tomorrow could cause Federal Reserve interest rate cut bets to rise, which could see the Pound to New Zealand Dollar (GBP/NZD) exchange rate shed more of its recent gains.

Josh Jeffery

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