Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Steady after IMF Warns about Brexit Consequences

October 9, 2018 – Written by Frank Davies

On Monday, the Pound to New Zealand Dollar (GBP/NZD) exchange rate opened in the region of NZ$ 2.0391 in the morning and closed slightly lower around NZ$ 2.0301 in the evening.

There was little UK or New Zealand domestic data to refer to yesterday, so GBP/NZD movement was instead caused by a reported drop in UK business confidence.

Analysts at Deloitte and experts at the British Chambers of Commerce (BCC) both reported that UK businesses were extremely unsure about how to proceed in the future, due to Brexit.

Months of stalled talks and a rapidly approaching November deadline have prompted this rise in uncertainty and recent weeks have brought supportive comments but no clear progress in the Brexit process.

BCC Head of Economics Suren Thiru said of his company’s findings:

‘The sharp deterioration of the share of firms attempting to recruit is a concern and reflects both persistent hiring difficulties and heightened economic uncertainty – which if sustained could materially weaken jobs growth.’

There was little hard data to push the New Zealand Dollar up against the Pound, but the NZD/GBP exchange rate still rose thanks to speculation about petrol prices.

A progressive weakening of the New Zealand Dollar has driven up fuel costs in the country, but speculation about the government cutting prices was enough to boost the NZD/GBP exchange rate.

Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate Static after IMF’s Brexit Warning

There has been another shortage of UK domestic data today, but comments from International Monetary Fund (IMF) officials have still had a limiting effect on the GBP/NZD exchange rate.

IMF experts have warned that the Brexit process could have major negative consequences for the UK and the wider Eurozone, depending on whether a deal is secured by the negotiation deadline.

In the event of a no-deal Brexit, for example, IMF officials believe that:

‘If there are arrangements which are more restrictive of trade, which put up more barriers which disrupt supply chains, then this is going to be more challenging for both the UK and its Eurozone partners.

‘And there are some very critical areas where, you know, a technical agreement does have to be reached; for example, on how to handle clearing of derivatives over the transition from old arrangements to new arrangements.’

GBP traders have been additionally unsettled by the IMF’s recommendation for the Bank of England (BoE) to potentially consider cutting interest rates:

‘In the United Kingdom, where the output gap is closed and unemployment is low, a modest tightening of monetary policy may be warranted, although at a time of heightened uncertainty, monetary policy should remain flexible in response to changing conditions associated with the Brexit negotiations.

New Zealand Dollar to Pound (NZD/GBP) Exchange Rate Steady on Forecast-Beating Surplus

Despite news of a higher-than-expected government budget surplus over the 2017-2018 period, the New Zealand Dollar (NZD) has continued to trade tightly against the Pound (GBP) today.

The government’s reported operating balance was NZ$ 5.534bn, above the Treasury’s forecast NZ$ 3.141bn level.

This is a positive piece of historical data for the NZ government, but comes at a time of low business confidence and pressure on the government to cut fuel prices.

Future Pound to New Zealand Dollar Exchange Rate Forecast: Will Slower UK GDP Growth Drag GBP/NZD Down?

The Pound (GBP) might be on track for losses against the New Zealand Dollar (NZD) on Wednesday when high-impact UK GDP data is due to come out.

If the reading for August shows a forecast-matching slowdown from 0.3% to 0.1% then the Pound could slide in value because of the negative implications.

On the other hand, however, if a surprise rise in GDP growth is reported then Pound Sterling could rally and rise sharply against the New Zealand Dollar.

Beyond this imminent economic data, the New Zealand Dollar could fall in value when Thursday’s Business NZ PMI comes out.

Covering manufacturing sector activity in September, this is tipped to show decline from 52 points to 51.8 and might worsen NZD/GBP trading.

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TAGS: Pound New Zealand Dollar Forecasts