Low Market Sentiment, US Equities Pressured

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GBP/NZD Exchange Rate Drops Over 1% On Delayed Meaningful Vote

UPDATE: The Pound to New Zealand Dollar (GBP/NZD) exchange rate plummeted during Monday’s session following the announcement by PM May to postpone the meaningful vote, originally scheduled for today.

The delay prompted a sharp Pound Sterling sell-off which saw GBP/ZND drop 1.1% throughout the day.

At its worst, the exchange rate hit a fresh low for the year at 1.81821. The FX pair has since recovered slightly and is now trading at 1.83258.

With no hard data releases for the New Zealand Dollar due today, the exchange rate is likely to remain susceptible to any further Brexit related developments as these remain the driving factor for recent Pound Sterling FX rates.

UPDATE: Monday’s early morning trade finds the Pound to New Zealand Dollar (GBP/NZD) exchange rate sharply lower as market sentiment remains low, with US equities under pressure across the globe and safe havens benefiting.

£1 bought 1.84690 NZ dollars at the time of writing.

The pound to New Zealand dollar forecast is set for extreme volatility next week. The British Pound to New Zealand Dollar exchange rate’s wide movement last week was influenced more by broad shifts in global market risk-sentiment. Still, next week’s UK Parliament vote is expected to be hugely significant for foreign exchange markets and Brexit – and the Sterling outlook.

Last week saw wide movement in the volatile GBP/NZD exchange rate. The sterling-kiwi pair opened the week at 1.8537 and briefly fell to its worst level in over a year – 1.8287 – before recovering towards the end of the week. While GBP/NZD could not hold its weekly high of 1.8613, it had still regained most of its weekly losses by Friday.

Pound Sterling New Zealand Dollar (GBP/NZD) Exchange Rates Recovers as US-China Trade Jitters Soar

The Pound was highly limp last week, repeatedly rising on market hopes for a softer Brexit and subsequently sliding as Brexit uncertainties and fears of a possible ‘no-deal Brexit’ only deepen.

UK Prime Minister Theresa May’s negotiated UK-EU Brexit deal and its perceived lack of domestic popularity has been the primary cause of Pound volatility, with markets now widely anticipating that the deal will be defeated when it faces a UK Parliament vote next week.

With the deal’s loss priced into Sterling, the British currency is volatile as there is no real indication of what path or form the Brexit process could take after the bill’s defeat.

Essentially, with Sterling fluctuating and volatile it was easier for the New Zealand Dollar to take point in last week’s GBP/NZD movement, especially amid last week’s significant and rapid shifts in global risk sentiment.

Earlier in the week, the Pound to New Zealand Dollar exchange rate plummeted as investors became hopeful that an announced US-China trade tariff truce lasting 90 days would help to cool trade tensions between the world’s two biggest economies.

However, these hopes were short-lived as US President Donald Trump kept up his fiery rhetoric towards China.

US-China trade jitters only worsened further on Thursday following the arrest of Huawei’s Chief Financial Officer, Meng Wanzhou, in Canada. As Huawei is a global telecoms giant from China, the arrest sent shockwaves through global markets.

Demand for the New Zealand Dollar rebounded just slightly on Friday, but ultimately the worsened US-China trade tensions left investors hesitant to take risks and made it easier for GBP/NZD to recover.

UK Parliament’s Brexit Vote to Dominate Pound Sterling’s Outlook

On Tuesday the 11th, UK Parliament will hold its highly anticipated vote over whether to sign UK Prime Minister Theresa May’s negotiated UK-EU Brexit deal into law or not – unless the vote is delayed.

While markets already widely expect that the deal will be blocked, the event is still hugely significant for the Pound due to its potential aftermath.

With mere months until the formal Brexit date in March 2019, the significant uncertainty that would follow the deal being defeated will leave Sterling volatile and analysts in limbo.

Following an amendment that was passed through UK Parliament last week, Parliament itself may take more control over the Brexit process if the deal is defeated.

Among the potential next steps are an attempt to renegotiate the Brexit deal, a ‘no-deal Brexit’, a change of government or general election, or even a second EU referendum.

However, until it becomes clearer how the Brexit process will unfold, the Pound will remain highly volatile.

It is unlikely to react much to upcoming UK data either, despite notable UK Gross Domestic Product (GDP) growth rate stats due on Monday and UK job market data on Tuesday.

US-China Developments to Drive New Zealand Dollar (NZD) Exchange Rates

Next week’s New Zealand economic calendar will be fairly uneventful and is unlikely to be too influential for the New Zealand Dollar outlook.

New Zealand retail card spending will be published on Tuesday, followed by food inflation on Thursday and the latest New Zealand business PMI on Friday.

Instead of data, the New Zealand Dollar will likely be driven by shifts in global risk-sentiment.

US-China trade relations were the primary cause of New Zealand Dollar movement last week and that could persist if there are any surprising developments.

If global trade jitters worsen, investors will be more hesitant to take risks and the New Zealand Dollar is likely to weaken.

Any notable shifts in Federal Reserve interest rate hike bets could also influence risk-sentiment and the New Zealand Dollar.

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2018-12-10 23:26:00

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