GBP/NZD Experiences Some Turbulence Before Boris Johnson's Meeting With European Commission Head
The GBP/NZD currency pair kicked off Tuesday morning on a turbulent note that affected its overall bullish momentum as investors assumed a cautionary stance and for a good reason.
The GBP/NZD is off to a bullish trend this week, but there were some notable bearish pulses on Tuesday morning. This was just hours ahead of a scheduled meeting between British Prime Minister Boris Johnson and Jean-Claude Juncker, the President of the European Commission. The two are expected to discuss the Brexit issue, especially regarding legislators’ plan to delay the Brexit date to increase the chances of securing a deal.
The Pound Sterling has been seeing significant upside ever since the British legislators started backing a bill that would delay the October Brexit date. There pound also experienced more upward momentum a week ago. There is a likelihood that the UK and the EU strike a Brexit withdrawal agreement before the October 19th and EU summit.
Reports released over the weekend revealed that Johnson is not interested in a Brexit delay deal. The GBP’s momentum was also slightly affected by an announcement by EU officials stating that the UK still has to highlight its Irish backdrop replacement plan.
The GBP/NZD exchange rate kicked off Tuesday morning’s trading session from its low of 1.9568. It then embarked on a strong rally for the day although there were some attempts at reversals. However, the currency pair’s bullish momentum prevailed for the better part of the day. The GBP/NZD exchange rate peaked the day’s trading session at 1.9698 while the price traded at 1.9697 at the time of this press.
The Pound Sterling also faced some pressure during the day. It was mostly from speculation that Johnson planned to notify the EU president that the UK would not entertain another Brexit delay offer. Analysts expect such reports to scare traders, a situation that will likely shave off some of the GBP’s gains.
New Zealand GDP figures to fuel the rally
New Zealand is expected to publish its GDP numbers on Wednesday, and this might end up fueling a rally in the exchange rate on a downward trend. This is because analysts anticipate unappealing results, thus weakening the New Zealand dollar’s performance against the GBP.
The current consensus figures estimate that New Zealand's economic growth for the second quarter to decelerate to 0.4% from 0.6%, the growth rate reported in Q1.
Such an economic growth rate slow down might encourage the Reserve Bank of New Zealand to implement more interest rate cuts. Additional interest rate cuts would make the New Zealand Dollar less appealing to investors.
Nonetheless, not all analysts and economists subscribe to this forecast. Westpack analysts are optimistic that the country’s strong service sector has been playing a critical role in facilitating a comfortable expansion rate.
Meanwhile, GBP traders are optimistic that the Bank of England (BOE) will steer towards a policy change that will favor the Pound. Some believe that the BOE will not make any monetary policy changes this month. This is because the UK’s economy has demonstrated noteworthy strength despite economic headwinds over the past few months.