The EU referendum continues to have a significant impact on sterling (GBP) exchange rates as the decisive vote draws near. Where next for the British pound to New Zealand dollar exchange rate this week?
With risk appetite on the decline and New Zealand food prices having contracted -0.5% on the month there was little reason to favour the NZD exchange rates on Tuesday morning.
Although opinion polls have shown increasing support for the ‘Leave’ campaign, the pound to NZ dollar exchange rate recovered some ground thanks to a positive ruling from the European Court of Justice regarding the UK’s proposed emergency brake on EU migrants’ benefits.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is forecast to recover ground if the Federal Open Market Committee (FOMC) indicates that interest rates are likely to be adjusted in July.
However, if recent events (including the soft US non-farm payrolls report) encourage the Fed to maintain a cautious attitude towards interest rate revisions, higher-risk currencies like the New Zealand Dollar are likely to benefit.
Tomorrow’s NZ Current Account Balance is forecast to have improved markedly in the first quarter, a result which would seem to imply that the domestic economy was in a more robust state.
Demand for the New Zealand dollar exchange rates could also increase ahead of the latest Federal Open Market Committee (FOMC) policy meeting, as investors do not anticipate any interest rate hike at this juncture
The UK’s referendum on membership of the European Union is having a significant impact upon Pound Sterling, with GBP volatility hitting a record high recently.
According to Reuters:
‘Euro/Sterling one-month implied volatility, derived from an option that covers the June 23 referendum date and its aftermath, hit 26.3% according to Reuters data, exceeding the previous record of around 25% hit during the global financial crisis in 2008. The equivalent Sterling/Dollar one-month implied volatility also rocketed to 28.1%, close to its 2008 peak of around 29%.’
Uncertainty over the outcome has worsened after a fresh ORB poll gave the pro-‘Brexit’ camp a 10-point lead on the pro-EU side, allegedly causing a panic in Downing Street.
Latest New Zealand/Australian Dollar Exchange Rates
On Friday the Pound to British Pound exchange rate (GBP/GBP) converts at
1
At time of writing the pound to pound exchange rate is quoted at 1.
At time of writing the pound to us dollar exchange rate is quoted at 1.252.
At time of writing the pound to euro exchange rate is quoted at 1.166.
The pound conversion rate (against australian dollar) is quoted at 1.912 AUD/GBP.
NB: the forex rates mentioned above, revised as of 26th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
Other Currency Exchange News
Tumbling stocks and global risk-aversion failed to weaken the New Zealand Dollar recently, which trended bullishly almost across the board.
The New Zealand Dollar made a bullish advance on Pound Sterling recently, gaining more than 1% on referendum-related weakness.
It wasn’t just a softening Pound that helped the New Zealand Dollar to strengthen, however, with news of steady industrial production in China and anticipation of strong domestic data results later in the week helping NZD advance.
NZD strength was in stark contrast to high-risk assets in general, with global stocks and the oil markets all tumbling. China’s Shanghai Composite stock index closed down -3.2%, while the Japanese Nikkei index ended the Australasian session having fallen -3.5%.
GBP/NZD Exchange Rate Forecast: Brexit fears are likely to hold sway over Pound Sterling over the coming days, despite high-profile UK data on the calendar.
UK consumer price data is due out on Tuesday and is expected to show a mild uptick in inflation.
However, with the UK’s referendum vote just ten days away, there is a strong chance that even high-impact data will be overlooked.
According to Joshua Mahony from IG; ‘It is clear that in a week which is relatively light on economic data, the focus will remain on the risk of a Brexit, which could destabilise not only the future of England, but also the European project as a whole.’
Morgan Stanley Forecast: New Zealand Dollar (NZD) Exchange Rates could ‘Extend its Appreciation in Coming Weeks’
Morgan Stanley currently holds a neutral outlook on the New Zealand Dollar, predicting that NZD appreciation could continue in the short-term.
Further strength could come from Wednesday’s first-quarter GDP figures; while a quarter-on-quarter slowdown in expected, year-on-year GDP is expected to show a strong rise from 2.3% to 2.6%.
However, the long-term outlook is more bearish. MS also warned that ‘the RBNZ expects to cut rates by 150bps in the scenario of no depreciation of NZD (as opposed to the 3% expected depreciation). With the TWI already trading above levels assumed in the "flat TWI" scenario, there is risk of rate cuts down the line to cause currency depreciation.’