GBP NZD Forecast: Pound Losses Likely if Commons Reject Lords’ EU Citizens Bill

The Pound has edged slightly higher against the New Zealand Dollar today but the pairing may tumble depending on how things in the House of Commons develop.

This follows a recent House of Lords vote, where as part of Article 50 debates, peers approved an amendment that requires the Government to make plans protecting the rights of EU citizens.

This approval was largely seen as a defeat for the Government, which had previously issued a plain assurance that there was ‘no question of treating EU citizens with anything other than the utmost respect’.

While the news raised optimism among Pound traders, this may prove short-lived given the incoming Parliamentary ‘ping pong’ taking place between the Lords and the House of Commons.

The fact that the amendment was approved in the Lords by over 100 votes is unlikely to guarantee a Commons approval, given that the Government has a majority in the Lower House.

Forecasting the outcome of the next vote, Guardian Political Editor Anushka Asthana has stated;

‘[It] seems very likely that [the] Commons will overturn this. [Approving the amendment] would need 30 plus Tories to vote with it, which doesn’t feel likely’.

Due to the nature of votes in Parliament, if the Lords and the Commons disagree then a bill fails. If MPs reject the amendment, then the Pound is likely to slide against the New Zealand Dollar due to hopes of a better bargaining position in EU negotiations being dashed.

While Sterling may be in for a near-term fall, the New Zealand Dollar might also be on the edge of a crash in value, given recent US developments.

The Federal Reserve is the focus point for future NZD demand, as recent Fed comments have dramatically raised the odds that a Fed interest rate hike could come in March.

Highlighting the sudden surge in market optimism has been the CME Group measure of how likely the Fed is to hike rates; for the March 15^th meeting, the odds have climbed from a prior 35.4% to 66.4% in the space of days.

A Fed rate hike would likely trigger an immediate and dramatic slide in NZD demand.

Recent Interbank GBP NZD Exchange Rates

At the time of writing, the Pound New Zealand Dollar (GBP NZD) exchange rate was trending in the region of 1.72 and the New Zealand Dollar Pound (NZD GBP) exchange rate was trending in the region of 0.57.