The Pound New Zealand Dollar (GBP/NZD) exchange rate is drifting lower today as markets express fresh concerns over a lack of certainty of the Brexit process.
Pound (GBP) Weakened by Growing Brexit Uncertainty
Sterling (GBP) finds itself fluctuating against the New Zealand Dollar (NZD) today as the UK currency struggles to cling to yesterday gains in the face of growing Brexit jitters.
The Pound exchange rate shot higher on Tuesday in the wake of the UK’s latest Services PMI, with analysts suggesting the robust growth in the UK private sector could open the door for the Bank of England (BoE) to still raise interest rates in 2018.
However Sterling has lost some of that shine today as a lull in domestic data has prompted markets to turn their focus towards the upcoming EU summit and the ongoing uncertainty surrounding Brexit.
Many investors remain jittery due to a lack of clarity over the UK government’s plans for Brexit, with markets still awaiting the publication of Theresa May’s whitepaper detailing how the government plans to achieve the split from the EU, something that is not doing any favours for the Pound.
Analysts at MUFG wrote: ‘While yesterday’s data is good news for the Pound, it can’t be viewed in isolation to the Brexit risks that are becoming a more dominant influence on the outlook for the economy.
We remain sceptical over Pound gains on positive macro news until we have clarity from the government on Brexit.’
Should the EU summit fail to deliver a breakthrough in Brexit negotiations as some observers fear, the long-term outlook for the Pound looks set to be fairly gloomy, regardless of a possible upswing in the UK’s economic fortunes.
New Zealand Dollar (NZD) Climbs as Market Risk Sentiment Rises Amidst a Fall in USD
Meanwhile the New Zealand Dollar (NZD) is climbing higher today thanks to a pullback in the US Dollar (USD), which helping to drive market risk appetite.
The downturn in the US Dollar comes despite the latest US trade figures beating expectations.
Some analysts have begun to suggest that the US Dollar may have peaked after it raced higher throughout May, largely on the back of rising Federal Reserve rate expectations.
However with the majority of investor already priced in for a rate hike from the Fed in its June policy meeting next week, the US Dollar appears to be left with little room to push higher.
This reduced demand for the US Dollar has bolster market risk appetite, helping to fuel demand for high-yield currencies such as the New Zealand Dollar.
Philip Borkin, senior macro strategist at ANZ said:
‘We are biased a little bit higher against the US, at least in the short-term … risk appetite, in general, is a little better.’
GBP/NZD Exchange Rate Forecast: Rebound in UK House Prices to Bolster Sterling?
Looking ahead the GBP/NZD exchange rate may be expected to rally in the second half of the week as the UK publishes its latest housing data.
Economists forecast Halifax’s UK House Price Index will reveal that, after contracting 3.1% in April, UK house price growth will have rebounded last month, likely putting some air the in the Pound’s sails.
Another source of movement in Sterling tomorrow will also be a speech by the Bank of England’s Dave Ramsden, with the GBP exchange rate strengthening if he appears open to the possibility of the BoE still targeting a rate hike this year.
Meanwhile a lull in domestic data may leave the New Zealand Dollar vulnerable to external influences for the remainder of this week’s session.
This could see the ‘Kiwi’ weaken especially if trade concerns lead to a reduction in market risk appetite.
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TAGS: Pound New Zealand Dollar Forecasts