With a ruling on the UK government’s ability to trigger Article 50 approaching, the fate of GBP NZD exchange rate forecasts hangs in the balance. The Pound New Zealand Dollar exchange rate has been one of the Pound’s most volatile pairings over the past week, fluctuating over 2%, with a difference of more than 350 pips between its highest and lowest points.
GBP NZD Exchange Rate Forecasts; Will Supreme Court Ruling Open Up Avenue to Block Brexit?
Upcoming legal challenges are likely to significantly shape GBP NZD exchange rate forecasts over the coming weeks, as they could define the type of Brexit the UK government ends up securing.
Next week will see the UK Supreme Court hearing an appeal from the government to a recent ruling by the High Court that Theresa May must seek Parliamentary approval in order to trigger Article 50. The government wanted to use ‘royal prerogative’ to invoke the EU’s exit clause without input from MPs, but a legal challenge fronted by investment manager Gina Miller successfully argued that withdrawing from the EU would remove rights from UK citizens, making it a matter for debate.
Should the Supreme Court overturn the High Court ruling, the government will be free to pursue a ‘Hard Brexit’, which would see the UK leave the single market; something highly concerning to investors. GBP NZD exchange rates would likely plummet immediately after the ruling, while remaining on a firm downtrend over the coming weeks as the government’s proposed timeframe for triggering Article 50 approaches.
However, if the Supreme Court upholds the initial challenge, Pound Sterling is likely to advance bullishly on the back of hopes MPs will be able to force Theresa May to prioritise single market access and protect UK businesses. According to a law professor at the London School of Economics, it is likely that all eleven Supreme Court judges will rule against the government. Some investors are hoping that, however unfeasible or politically incendiary, a cross-party alliance of MPs may even band together to block Brexit completely if Parliament gets a say on Article 50.
Will December Fed Rate Hike Trigger Wave of USD Demand, Weakening NZD GBP Exchange Rates?
The New Zealand Dollar has domestic problems to worry about as well, but the movement of the last few days has primarily been in reaction to speculation over US monetary policy. According to the markets, a Fed rate hike is almost guaranteed next month; market odds climbed to a record 100% a few days ago, causing a serious slump in the New Zealand Dollar.
While overvaluation fears have seen investors withdraw from the ‘Greenback’, supporting ‘Kiwi’ demand, a rate hike is likely to be seen as the beginning of a tightening cycle, not a one-off adjustment. Markets are already pricing in another 0.25% of hikes by June 2017, with a 25% chance that the upper bound will be 1.25% in twelve months’ time.
With such a positive outlook for the US Dollar over the coming months, the New Zealand Dollar could find itself under pressure, with only Pound weakness keeping the ‘Kiwi’ as the dominant currency.
Interbank GBP NZD Exchange Rate Forecasts
The GBP NZD relative strength indicators are currently trending just above 50, showing the currency pairing is close to its fair value. However, the short-term and long-term moving averages are beginning to converge, which could suggest the markets will soon position themselves short on GDP.
The moving average convergence difference (MACD) is used by traders to determine whether a currency pairing is likely to be profitable in the short term; the current movement towards a downwards crossover indicates this is unlikely. With investors seeing this as a signal to sell the Pound in favour of the New Zealand Dollar, it is likely that GBP NZD exchange rate forecasts will hold a negative outlook for Sterling.
At the time of writing, GBP NZD exchange rates were trending up 0.3% in the region of 1.75, while the NZD GBP exchange rate was trading around 0.56.
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