British Politics and the influence on the New Zealand Dollar

The Kiwi dollar and the pound rise on better news

The Pound has once again come under a lot of pressure caused by the politics in the UK. Over the weekend Brexit Secretary David Davis handed in his resignation and this was followed by Foreign Secretary Boris Johnson yesterday afternoon.

Following the Chequers meeting over the weekend, which was meant to galvanize the Conservatives in their attempt to sort out what will happen with the Brexit talks going forward, both announcements have caused the Pound to wobble.

Since the weekend, the Pound has dropped by 2 cents vs the New Zealand Dollar creating some good short term opportunities to sell New Zealand Dollars to buy Pounds.

However, personally speaking I think the Pound’s losses will be short lived as the government appear to be moving towards a softer Brexit which is likely to appease financial markets.

The ongoing Trade Wars between the US and China do not appear to be slowing down and this is causing global tensions to rise and as the New Zealand Dollar is a commodity based currency any slowdown in global trade can cause uncertainty for the NZD sending GBPNZD exchange rates in an upwards direction.

Indeed, once we are past this political hurdle I think we could see the Pound move towards 2 against the New Zealand Dollar towards the end of this month.

The other big factor influencing the value of the New Zealand Dollar is what is happening with the US Federal Reserve.

The US have raised interest rates 7 times since December 2015 and with further rate hikes expected before the end of the year we could see further weakness for the New Zealand Dollar.

US inflation data is due for release on Thursday afternoon and if this remains high this will provide evidence in support of further rate hikes in the US which could see GBPNZD exchange rates go in an upwards direction.

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