The GBP NZD exchange rate dropped to a record low this morning following a flash crash involving the Pound in last night’s Asian market. The exact reason for this crash is still a mystery but there is strong speculation that it was caused by either an automated trader glitch or a ‘fat fingered’ trade.
Flash Crash Reverses GBP NZD Recovery
This is unfortunate news for the Pound as GBP NZD was one of the few pairings in which Sterling had begun to make a notable recovery.
Sterling was close to stabilising at last week’s levels yesterday, thanks to a string of positive data from the UK and a decline in prices at the New Zealand dairy auction, but now appears set to end this week’s session at an all-time low.
The Pound’s attempt to recover from the crash was complicated by today’s weak domestic data, with the industrial production report showing a drop from 0.1% to -0.4% for the month of August despite forecasts that it would rise to 0.2%, which saw the Pound dip even lower than seen immediately after the crash.
GBP NZD Exchange Rate to Remain Weak in Face of ‘Brexit’ Fears?
Market sentiment toward the Pound has been overwhelmingly negative over the last week in the wake of the announcement that the UK government would invoke Article 50 of the Lisbon Treaty and enter official ‘Brexit’ negotiations with the EU by the end of March 2017.
Sterling has fallen as investors fear a ‘hard Brexit’ by the UK government will see Britain lose access to the highly valued single market and have a detrimental effect on UK businesses.
Philip Hammond is currently in the US trying to reassure traders that the city of London’s status as the financial centre of Europe and as a global leader in the financial sector is not under threat by the UK leaving the European Union. It is unclear how much of an effect this may have with the Pound currently in such dire straits.
Lack of Data Means Sentiment will Motivate GBP NZD Movement Next Week
Both UK and New Zealand data releases are looking sparse next week with only eight reports due for each nation, which is particularly problematic for the Pound as is in desperate need of something to distract markets from the uncertainty surrounding ‘Brexit’.
For better or for worse the Pound’s fate is irreparability tied to the political situation that surrounds ‘Brexit’ which as David Bloom, HSBC’s global head of FX points out Sterling has now ‘become a political and structural currency.’
Current Exchange Rates
At the time of writing the GBP/NZD exchange rate was trending around 1.72 and the NZD/GBP exchange rate was trending around 0.58
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