GBP/NZD Exchange Rate Nosedives as UK Government Threatens to Walk Away from EU Trade Talks By June

GBP/NZD Exchange Rate Tumbles as UK Publishes its Trade Mandate

The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is in the doldrums this morning, after the UK published its mandate for trade negotiations with the EU.

The GBP/NZD exchange rate is now trading at over NZ$2.0365, down nearly 0.8% from this morning’s opening levels.

Pound (GBP) Plummets as UK Trade Mandate Reignites No-Deal Brexit Fears

The Pound (GBP) is struggling in the face of heavy selling this morning, following the publication of the UK’s mandate for future trade negotiations with the EU.

Outlining the UK’s trade priorities, Chancellor of the Duchy of Lancaster, Michael Gove said that the UK’s aim will be to secure a ‘comprehensive free trade agreement’.

But Gove also reiterated that the UK will not accept any alignment with EU regulations, a major sticking point for the EU as it seeks to maintain a ‘level playing field’ with the UK.

Most crucially for GBP investors however is the government’s threat that it may walk away from trade negotiations in June if the EU is unwilling to offer a Canada-style free trade deal.

Markets fear it is highly unlikely the EU will agree to such terms, leaving a clear risk of a damaging no-deal Brexit.

New Zealand Dollar (NZD) Buoyed by USD Weakness

At the same time, the New Zealand Dollar (NZD) is trending higher this morning, mostly on the back of broad weakness in the US Dollar (USD).

This slump in the US Dollar comes on the back of a speech by US President Donald Trump who failed to reassure investors over the impact of the coronavirus.

This came shortly after former Chair of the Federal Reserve, Janet Yellen warned that the coronavirus could push the US economy towards a recession.

‘We could see a significant impact on Europe, which has been weak to start with, and it’s just conceivable that it could throw the United States into a recession.’

The resulting run on the US Dollar has proved positive for the ‘Kiwi’, but as markets remain griped by coronavirus panic the upside in NZD looks to be limited.

GBP/NZD Exchange Rate Forecast: BoE’s Haldane to Offer Hints on Monetary Policy?

Looking ahead, movement in the Pound to New Zealand Dollar (GBP/NZD) exchange rate at the end of this week is likely to be dictated by the tone struck by the Bank of England’s (BoE) Andy Haldane in a speech on Friday.

This could see Sterling weaken on Friday if Haldane hints at the possibility of the BoE cutting interest rates in the near-term as it faces pressure from both Brexit and the coronavirus.

Haldane was one of the two BoE policymakers to have voted for an immediate rate cut at the BoE’s previously policy meeting in January.

Meanwhile, the ‘Kiwi’ is likely to remain highly sensitive to coronavirus developments through the end of the week, potentially weighing on NZD exchange rates if the news flow remains broadly negative.

Matthew Andrews

Contact Matthew Andrews