New Zealand Leadership Prompts Drop in Business Confidence, GBP/NZD Exchange Rate Liable to Capitalise
The Pound New Zealand Dollar (GBP/NZD) exchange rate could benefit in the medium-term from the ongoing business confidence issues surrounding New Zealand’s new leadership.
New Zealand business confidence declined over the December quarter, with businesses facing the prospect of weaker growth after the October change in government.
NZIER’s quarterly survey of business opinion revealed a drop in the index from 5% previous to -12% (far below the forecast drop to 2%).
This is, however, a general trend, with business confidence typically declining when there is a change to a Labour-led government.
Nonetheless, general uncertainty and various new policies remain a cause for anxiety, with the Reserve Bank of New Zealand’s (RBNZ) new dual mandate, measures to curb immigration, and the foreign purchase of new builds providing particular cause for concern.
Ultimately, the New Zealand Dollar’s performance will largely be dependent on how new policies impact industrial relations, and how effective these are in reconfiguring the property market.
Pound (GBP) Exchange Rate Forecast Upbeat on Potential for Bespoke Brexit
The market outlook on Brexit has become slightly more positive in recent months, with recent comments from financial minsters from Spain and the Netherlands seemingly opening up the possibility of a ‘bespoke’ Brexit deal.
Dutch Finance Minister Wopke Hoekstra and his Spanish counterpart Luis de Guindos met earlier this week and discussed various common interests in Brexit, with the outcome reportedly being a combined willingness to push towards a ‘soft’ Brexit.
This was quickly shot-down by the Spanish Economy Ministry, however, with a spokeswomen asserting that both ministers still support EU negotiator Michel Barnier’s efforts.
Nonetheless, this brief show of strain in the EU’s united front seems to indicate that various member nations could be willing to offer the UK a bespoke deal in the interests of preserving trade.
Various EU Ambassadors are due to reconvene on Thursday to discuss elements like this, with any significant changes to the EU’s overall draft position liable to cause volatility for the Pound.
If they do indeed prove more lenient then the Pound could rise.
Unwillingness to be open to bespoke dealings could limit the GBP/NZD exchange rate, however.
Global Dairy Price Surge Pressures GBP/NZD Exchange Rate, but will it Last?
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate gained despite the fact that dairy prices posted their biggest shift in price since August 2017 yesterday, with the previous 2.2% figure quickly eclipsed by a whopping 4.9% rise.
This jump was predominantly due to the effects of bad weather conditions.
Nonetheless, some analysts caution that this growth might ease in the coming months, particularly with global dairy supplies liable to pick up the slack.
Amy Castleton, Analyst at AgriHQ stated:
‘Poor milk production from NZ should be supporting prices for WMP… as NZ is the key supplier. But global milk production continues to grow – notably that coming out of Europe and the US – so plenty more skimmed milk powder, butter and cheese will make its way onto the global market in the coming months’.
This eventuality could quickly curb investor demand for the ‘Kiwi’ Dollar, effectively relieving some pressure on the GBP/NZD exchange rate.
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