Pound to New Zealand Dollar Exchange Rate Climbs in Risk-Averse Markets
Investors continued to buy the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate today, despite fresh concerns that UK-EU Brexit negotiations could still collapse even amid the recent progress in talks.
Due to a combination of Brexit hopes and market aversion to trade-correlated currencies, GBP/NZD has seen strong gains since last week.
GBP/NZD gained an impressive four cents last week, advancing from the interbank level of 1.95 to 1.99, and has seen further gains already this week.
GBP/NZD trended near its best levels since the 2016 Brexit referendum at the time of writing on Wednesday, near the interbank level of 2.05.
Pound (GBP) Exchange Rates Pressured amid Fears of Set-Backs in Brexit Talks
Following yesterday’s impressive surge in demand for the Pound (GBP), today’s movement has been a little more limited. Sterling has been fluctuating broadly and today’s GBP/NZD gains have been more due to New Zealand Dollar (NZD) losses.
Hopes that the UK and EU were getting closer to reaching a draft Brexit deal that could be ready as soon as this week, softened today.
Fresh uncertainties rose, due to reports suggesting that Northern Ireland’s DUP Party was not happy with the concessions the EU wants from the UK government on talks.
It led to speculation that talks could fall through again, or that a Brexit delay may be inevitable even if talks continue. According to Kit Juckes, Head of Currency Strategy at Societe Generale London:
‘It looks like a deal is being worked on but everyone who works with the EU knows that these deals happen at the last minute,
It seems more likely than not that we will need an extension.’
New Zealand Dollar (NZD) Slumps on Trade Tensions and RBNZ Rate Cut Bets
The New Zealand Dollar (NZD) was one of the market’s weakest major currencies today, as it came under pressure amid a combination of domestic and global factors.
Perhaps the biggest thing weighing on the New Zealand Dollar was the ongoing US-China trade war. Investors have again lost interest in trade-correlated currencies like the New Zealand Dollar, as hopes for a preliminary trade deal have diminished.
However, on top of the US-China trade tensions weighing heavily on trade-sentiment, fresh Reserve Bank of New Zealand (RBNZ) interest rate cut bets are compounding New Zealand Dollar weakness.
RBNZ Deputy Governor Geoff Bascand said today that the RBNZ may need to keep cutting rates lower.
Due to the bank’s dovish comments, the New Zealand Dollar failed to benefit from New Zealand’s stronger than expected Q3 inflation rate results this morning.
Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Could Extend Highs if Brexit Deal Possible
The Pound’s (GBP) reactions to Brexit developments are by far this week’s most influential currency movements, and these sharp movements are likely to continue or even deepen towards the end of the week.
The anticipated EU Summit, which could see the UK and EU reach a Brexit deal of some sort, is due to be held tomorrow and Friday.
If negotiations go well and a Brexit deal remains in sight, GBP/NZD could firm further gains. GBP/NZD would gain even higher if US-China trade tensions persist and keep pressure on the New Zealand Dollar (NZD).
On the other hand, the Pound could plummet it talks are perceived as failing, or if concerns of UK Parliament blocking the deal worsen.
Upcoming UK data is likely to be overshadowed by Brexit news, and there is no notable New Zealand data due for the remainder of the week.
However, if US data or Federal Reserve speculation surprises investors, this could also influence movement in the Pound to New Zealand Dollar (GBP/NZD) exchange rate.