EU Offers Three-Month Brexit ‘Flextension’ – Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Flat

Pound New Zealand Dollar (GBP/NZD) Exchange Rate Muted as EU27 Offers Brexit Extension

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate was left muted today, and the pairing is currently trading around NZ$2.0183.

The Pound was left under pressure as Prime Minister Boris Johnson awaited the decision of the EU27.

Last week, the bloc agreed it would allow the UK to extend Article 50, and a draft agreement included multiple possible dates for a new deadline.

The dates included in the draft range from 30 November to 31 January, and economists predicted the shorter the extension granted, the more likely Sterling will suffer losses.

Later in the morning, European Council President, Donald Tusk revealed the bloc had agreed to give the UK a ‘flextension’ to 31 January.

The longer extension gave Sterling a slight nudge, although the pairing was still left largely flat.

A no-deal Brexit is still very unlikely and commenting on this, Ipek Ozkardeskayta from London Capital Group said:

‘As it stands today, the probability of a no-deal Brexit is very slim. From the market perspective, a no-deal scenario is almost fully reflected in Sterling prices near the 1.30 mark against the US Dollar.

‘Pound traders have further trimmed their net short positions during the week that ended on October 22nd and have already moved on to pricing Britain’s next political challenges.’

New Zealand Dollar (NZD) Flat despite Increase in US-China Optimism

The New Zealand Dollar was left under pressure today despite an increase in US-China trade optimism at the end of last week.

After a high level phone call between China’s Vice-President Liu He, and US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, Washington and Beijing said they were ‘close to finalizing’ a first-stage agreement.

They also revealed that parts of the text are ‘basically completed’, causing risk appetite to rise.

Added to this, on Saturday, China’s Commerce Ministry said both sides had agreed to address core issues and that the US will import cooked poultry from China while Beijing is going to lift a ban on US poultry.

However, the ‘Kiwi’ was left flat as this agreement would only be a small move towards a much larger, and more comprehensive deal which is likely to take a lot longer.

Added to this, the city’s Financial Secretary revealed that Hong Kong has fallen into a recession after five months of anti-government protests.

Pound New Zealand Dollar Outlook: Will MPs Vote against PM’s Early Election?

Meanwhile, Sterling (GBP) is likely to remain muted against the New Zealand Dollar (NZD) MPs are expected to vote on Boris Johnson’s call for an early general election on 12 December.

It seems unlikely the Prime Minister will seal approval of two-thirds of parliament that is needed to pass the motion, which will likely leave the Pound New Zealand Dollar (GBP/NZD) exchange rate flat.

Millie Empson

Contact Millie Empson