Monthly Worst for GBP/NZD as No-Deal Brexit Fears Revived

The Pound has been hit hard by fresh no-deal Brexit fears this week. Reports that the UK government could undermine the EU withdrawal agreement with a different plan has led to a surge in no-deal Brexit fears.

Meanwhile, the New Zealand Dollar advanced through the week, despite speculation of negative interest rates from the Reserve Bank of New Zealand (RBNZ).

 

Last Week: Market Rebound Drives Volatile Movement

Both the Pound and New Zealand Dollar saw mixed movement last week as investors reacted to a rebound in forex market movement.

The Pound benefitted from weakness in the US Dollar and Euro, while the New Zealand Dollar benefitted from weakness in the Australian Dollar. This left GBP/NZD mixed, with the pairing only closing the week slightly lower.

NZD exchange rates did come under pressure at the end of last week after comments from the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr struck a dovish tone. The RBNZ Governor hinted at ‘additional tools’ and possible negative rates for future monetary policy ahead of the central bank’s next meeting later in the month.

However, despite the ‘Kiwi’ also coming under pressure from US-China tensions overnight due to a possible US ban on some Chinese cotton products, NZD is climbing against GBP as Pound exchange rates plummet on pessimistic Brexit headlines.

 

Three Things to Watch Out for This Week

  1. Brexit Developments

No-deal Brexit fears sent the Pound plummeting this week, and are likely to remain a factor as the year draws to an end. Any surprising Brexit developments in the coming sessions will drive volatility in Sterling.

 

  1. New Zealand Manufacturing Report

New Zealand’s Q2 manufacturing report will be published during tomorrow’s Asian session, and with a forecast drop of -12%, the New Zealand Dollar will likely come under pressure.

 

  1. UK Growth Report

This week’s only noteworthy UK data will be published on Friday. Among the slew of stats will be Britain’s July growth rate data, which could bolster Pound support if it impresses investors.

 

GBP/NZD Outlook

Brexit and rising coronavirus cases will likely be the main drivers for the GBP/NZD exchange rate this week. However, the Pound could experience some volatility on Friday’s GDP and trade balance data releases.

Meanwhile, anticipation of the RBNZ meeting later in the month and expectation of further monetary stimulus could provoke volatility in the New Zealand Dollar.

Josh Jeffery

Contact Josh Jeffery


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