NZ dollar rallies against British pound on Brexit turmoil

Friday 16th November 2018

The New Zealand dollar climbed against the British pound amid intensifying political turmoil in the UK over the government's Brexit plans. The kiwi also strengthened against the US currency.

"Brexit dramas are hogging the headlines," ANZ Research senior economist Liz Kendall and senior macro strategist Philip Borkin said in a note. "The sterling collapsed overnight as earlier optimism around Brexit quickly faded."

The New Zealand dollar traded at 53.41 British pence at 9am in Wellington from 52.26 pence late Thursday. It was at 60.23 euro cents from 59.99 euro cents.

"After edging closer to Brexit, with a draft deal agreed between UK and EU negotiators, UK politics descended into chaos overnight," Kendall and Borkin said, pointing to the resignation of Brexit Secretary Dominic Raab and other ministers.

"This has renewed concerns about whether it will be possible to secure Parliamentary support for the deal, with a lot of opposition both from opposition parties and within Teresa May’s own party,” Kendall and Borkin said. “But also, the turmoil has renewed speculation about Teresa May’s ongoing leadership prospects.

The kiwi traded at 68.29 US cents in Wellington from 67.99 cents late Thursday. The trade-weighted index was at 74.60 from 74.22.

The kiwi had "another bulletproof night" against the US dollar, ANZ said.

"It avoided the volatility seen elsewhere suggesting market positioning is still a dominant narrative,” Kendall and Borkin noted. “Technically, it has broken through the first level of topside resistance, but there seems to be plenty of other key levels up here that will make the path higher tricky.”

A Commerce Department report showed US retail sales rose 0.8 percent in October, compared with a 0.1 percent decline in September that was revised from an increase. Even so, a measure of underlying spending indicated growth has begun to slow.

“The US consumer is still spending,” said Kendall and Borkin. “Retail sales rose more than expected. That said, momentum in core sales is slowing.”

The kiwi traded at 93.76 Australian cents from 93.44 cents Thursday.

The New Zealand dollar was at 4.7393 Chinese yuan from 4.7166 yuan and at 77.60 yen from 77.13 yen.

(BusinessDesk)

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