Pound to New Zealand Dollar Exchange Rate Gains Limited amid Brexit Uncertainty

Pound to New Zealand Dollar Exchange Rate up on RBNZ Negative Rates Talk

Despite mixed hopes for UK-EU Brexit negotiations, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has been climbing this week. The New Zealand Dollar (NZD) is being weighed by negative interest rate speculation.

Since opening this week at the interbank level of 1.94, GBP/NZD has been trending with an upside bias. Yesterday, GBP/NZD saw a jump in demand that briefly touched on highs of 1.97. This was the best level for the pair in a month.

While GBP/NZD has slipped from those highs, it is holding most of this week’s gains. At the time of writing, GBP/NZD is trending in the interbank region of 1.96.

The Pound (GBP) is struggling to capitalise on the New Zealand Dollar’s weakness. Concerns that UK-EU Brexit negotiations could collapse soon are dominating the Pound outlook.

Pound (GBP) Exchange Rate Strength Limited by Brexit and Coronavirus Uncertainty

The Pound (GBP) has seen mixed and volatile movement this week so far. Concerns about how the Brexit process will unfold continue to be the biggest focus for Pound investors.

UK-EU Brexit negotiations have been extended another month, and reportedly there has been notable progress on major issues. This has helped the Pound to advance.

However, there has also been speculation that talks could collapse in the coming weeks if the UK government is not happy with progress in talks.

Reports yesterday suggested the UK government could pull out of talks as soon as next week.

Sterling’s advances are also being limited by speculations that Britain could see fresh coronavirus restrictions next week, as the nation’s infection rate remains high.

New Zealand Dollar (NZD) Exchange Rate Weighed by Negative Rate Talk

The Reserve Bank of New Zealand (RBNZ) has continued to signal negative interest rates for New Zealand. This has been a consistent downside pressure in the New Zealand Dollar (NZD) outlook lately.

Christian Hawkesby, Assistant Governor at the RBNZ, made dovish comments on inflation today. His comments indicated that negative rates could be implemented sooner rather than later.

Still, demand for the New Zealand Dollar was boosted slightly since then, helping to push GBP/NZD back from highs.

It came amid market hopes that there could still be some form of US fiscal stimulus passed before the upcoming US Presidential Election next month. This news made investors more eager to take risks, supporting the risk-correlated New Zealand Dollar.

Pound to New Zealand Dollar (GBP/NZD) Exchange Rate Focused on Political Developments

The Pound to New Zealand Dollar (GBP/NZD) exchange rate is expected to remain focused on potential political developments over the coming week.

Sterling (GBP) movement will remain focused on Brexit. If there are more signs the UK government could pull out of negotiations, the Pound could shed some recent gains.

Optimistic news or hopes of a deal could instead help the Pound to sustain gains.

As for the New Zealand Dollar (NZD), it will remain sensitive to domestic and global risk-factors. Domestic Reserve Bank of New Zealand (RBNZ) concerns could keep NZD down.

US political uncertainties, such as a worsening of US President Donald Trump’s health or political uncertainty, could also weigh on the New Zealand Dollar’s appeal.

However, if US stimulus hopes rise, investors will be more willing to take risks.

Tomorrow’s UK trade and growth data could also prove influential for the Pound to New Zealand Dollar (GBP/NZD) exchange rate if it surprises investors.

Josh Jeffery

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