Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Rebounds from 2-Month-Low

Pound to New Zealand Dollar Exchange Rate Sees Modest Rebound Follow NZD Rally

While the Pound (GBP) saw strong gains last week on UK election news, this week has seen the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate shed those gains twice over. This was thanks in part to a strong New Zealand Dollar (NZD).

After jumping from the interbank level of 2.00 to 2.02 last week, GBP/NZD has plummeted this week and has shed over four cents.

GBP/NZD briefly touched on a low of 1.96 last night, the worst level for the pair since October. Since then, GBP/NZD has edged higher and is trending in the interbank region of 1.97 at the time of writing.

The Pound plummeted this week, as fears of a worst-case scenario no-deal Brexit returned to markets.

Meanwhile, the New Zealand Dollar benefitted from outlook hopes. New Zealand data has been solid, and Reserve Bank of New Zealand (RBNZ) interest rate cut speculation has softened.

Pound (GBP) Exchange Rates Find Modest Support in Stronger UK Growth Report

This week, the Pound (GBP) has seen days of losses, on fears that UK Prime Minister Boris Johnson will not prioritise a soft Brexit or extend the Brexit transition period. This caused a full revival of fears that Britain could see a cliff-edge Brexit outcome at the end of 2020.

As investors wound back optimistic bets for a softer Brexit slightly, the Pound spent the week tumbling.

Yesterday a combination of no-deal Brexit fears, as well as continued warning from analysts that the Bank of England (BoE) could cut UK interest rates in 2020, led to further Pound losses.

Today has seen the Pound rebound slightly from its worst levels. The British currency was supported slightly by the day’s UK growth rate report, which beat projections in both quarterly and yearly figures.

The data was unable to give the Pound more than a modest boost, amid the uncertainty still dominating the outlook. According to Andrew Wishart, UK Economist at Capital Economics:

‘The underlying picture is still that there is very little momentum in the economy.

All this backward-looking news is less important than the timelier data which suggest that the economy may have done no better than flatline in the fourth quarter. And whatever happens, Brexit uncertainty looks set to persist’

New Zealand Dollar (NZD) Exchange Rates Fall Back after Growth-Inspired Rally

The New Zealand Dollar (NZD) has seen bullish performance this week. US-China trade optimism and strong New Zealand data boosted hopes that New Zealand’s economic outlook will remain resilient.

The trade-correlated currency has benefitted from the US-China ‘phase one’ trade deal, but domestic news has been even more supportive for the New Zealand Dollar in recent sessions.

Stronger than expected New Zealand confidence and growth stats have only made investors more confident that New Zealand’s economy remains resilient.

Yesterday’s New Zealand growth rate unexpectedly rose to 0.7% quarter-on-quarter, further dousing Reserve Bank of New Zealand (RBNZ) interest rate cut speculation. According to Ben Udy from Capital Economics:

‘The RBNZ will be reassured by the fact that growth was much stronger than they had forecast, so a February rate cut is now looking unlikely,’

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate to be driven by Political Developments

The Pound’s (GBP) rebound today was slightly boosted by UK growth stats. After a week of sharp losses though, these gains are still limited. Investors are also unlikely to sell the New Zealand Dollar (NZD) too much amid confidence over New Zealand’s economic resilience.

As a result of this and a lack of notable data due during the festive period next week, the Pound to New Zealand Dollar (GBP/NZD) exchange rate may not see much movement from its current levels in reaction to economic news.

Instead, with Brexit developments expected in the coming sessions and US-China trade speculation still on the minds of investors, politics and geopolitics will remain the focus for GBP/NZD investors.

It is widely expected that the UK government will push its Brexit plans through Parliament today. If the government continues to take a push a harder Brexit stance, the Pound may be in for fresh losses.

The Pound to New Zealand Dollar (GBP/NZD) exchange rate could also see further falls if US-China trade negotiations show fresh signs of optimism that would boost trade-correlated currencies like the New Zealand Dollar.

Josh Jeffery

Contact Josh Jeffery