The Pound New Zealand Dollar (GBP NZD) exchange rate jumped by almost a cent this morning as markets flocked from the US Dollar (USD) to Sterling after Trump’s healthcare bill failed to pick up the support needed to pass.
USD investors viewed the bill as the first real test of the Trump administration’s legislative clout ahead of his plans to implement his much-anticipated economic policies, with analysts now fearing that his spending and tax reforms could also be blocked by congress.
The defeat will also likely force Trump to scale down his stimulus package as he loses the potential saving his replacement to ‘Obamacare’ would have provided his administration.
As The Observer points out;
‘The impact on the budget deficit would be substantially less than originally estimated: a reduction of $150bn (£120bn), rather than $336bn. Fiscal conservatives in Congress will probably demand that Trump finds savings elsewhere.’
While both Sterling and the New Zealand Dollar gained from the news, rising risk aversion from traders prompted the Pound to come out on top.
Meanwhile the ‘Kiwi’ was softened further by a persistent slump in commodity markets this morning as Chinese futures plummeted during the Asian session.
Commodity prices have been marred by increased volatility in recent weeks leading investors to steer clear of high-yield currencies such as the New Zealand Dollar.
However the recent weakness in the US Dollar could see this downturn reversed in the near-future as USD-priced commodities become more attractive to buyers.
Looking ahead the GBP NZD exchange rate is likely to be pushed back over the coming week as markets brace for Prime Minister Theresa May to trigger Article 50 on Wednesday, officially beginning the UK’s exit from the EU.
While markets have had time to prepare for Brexit for months, the recent drop in the Pound at the start of last week after the PM’s spokesperson announced the leaving date suggests that markets have not finished pricing in Brexit and that it could have further to fall.
Meanwhile the New Zealand Dollar may find itself directionless this week thanks to a lull in domestic data, with the most notable data coming on Friday as ANZ releases its Business Confidence figures for February.
Current Interbank Exchange Rates
At the time of writing the GBP NZD exchange rate was trending around 1.78 and the NZD GBP exchange rate was trending around 0.56.
Comments are closed.