Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Losses Slow on Fresh Round of Risk-Aversion

Pound to New Zealand Dollar Exchange Rate Remains Weak on Brexit and Election Jitters

While the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is edging higher today on fresh New Zealand Dollar (NZD) weakness, the pair is still on track to see notable losses this week due to the latest Brexit uncertainties and UK election fears.

Following last week’s impressive gains, GBP/NZD has shed almost half of those losses this week so far.

GBP/NZD opened this week at the interbank level of 2.03, and has spent the entire week trending lower. At the time of writing on Friday, GBP/NZD trends close to the interbank level of 2.01.

The New Zealand Dollar’s gains have been limited by global geopolitical jitters today, but investors are hesitant to buy the Pound (GBP) amid uncertainty over how long the EU will extend the Brexit process for.

Pound (GBP) Exchange Rates Tumble on Brexit and General Election Concerns

UK Parliament voted this week not to support a fast-track of Prime Minister Boris Johnson’s newly reached UK-EU Brexit deal, which has meant that Brexit is unlikely to happen on its current 31st of October deadline.

The EU is now widely expected to accept the government’s request for an extension, but fresh uncertainty has risen over how long the extension will be and what the new time will be used for.

Johnson’s government has announced intentions to hold a general election on the 12th of December, but there is currently uncertainty over whether the government has the support it needs in parliament to achieve an election.

The opposition Labour Party has said it will not agree to a general election unless Johnson rules out a no-deal Brexit outcome. This has worsened uncertainty over how the issue will proceed, with some analysts saying an election may be unlikely.

Due to the election uncertainty, there is speculation that the EU will delay its extension decision until next week rather than today. This is very close to the Brexit date, which is keeping the Pound jittery.

New Zealand Dollar (NZD) Exchange Rates Weaken as Risk-Sentiment Dampened

Hopes for progress in the Brexit process and US-China trade negotiations had caused stronger market demand for relatively risky trade-correlated currencies like the New Zealand Dollar (NZD) for much of the week.

However, amid the latest complications in the Brexit process, as well as the possibility of a general election, UK-EU geopolitical uncertainties have risen again.

This has left investors hesitant to keep buying the trade-correlated New Zealand Dollar, which saw modest losses against the Pound today.

Trade sentiment was further damaged by fresh US-China trade tensions as well, as US Vice-President Mike Pence criticised China in a speech. Some analysts speculated that this could damage US-China trade relations.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Awaits Brexit Decisions

Could Britain be in for months more uncertainty? The current uncertainty weighing on the Pound (GBP) is likely to persist at least until the EU makes its decision on a Brexit extension, but that may lead to even further murkiness.

Investors are anxious that the EU could offer Britain just a small extension, or that it could be a particularly long extension, which could lead to higher no-deal Brexit fears or the expectation for months more Brexit uncertainty and weak economic performance.

If there is no general election, hopes may rise that the UK government can pass its Brexit plan in the coming months instead, but it is also possible there may be months without progress on Brexit.

Essentially, the Pound outlook is limited amid the expectation for an extended period of uncertainty.

The New Zealand Dollar (NZD), on the other hand, could see stronger demand again next week if upcoming New Zealand data impresses or US-China trade talks go well.

There is speculation that US President Donald Trump will take a more friendly tone in negotiations compared to the Vice-President, in order to make a deal more likely.

The Pound to New Zealand Dollar (GBP/NZD) exchange rate could also be influenced by New Zealand building and confidence data next week.

Josh Jeffery

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