NZ dollar gains vs. British pound

Tuesday 04 October 2016 08:50 AM

NZ dollar gains vs. British pound as UK PM Theresa May outlines Brexit timeline

By Paul McBeth

Oct. 4 (BusinessDesk) - The New Zealand dollar gained against the British pound as UK Prime Minister Theresa May's announcement of a timeline to quit the European Union triggered a sell-off in the sterling with traders spooked by the prospect of Britain leaving the single market.

The kiwi rose to 56.52 British pence at 8am in Wellington from 56.10 pence yesterday. The trade-weighted index was little changed at 77.18 from 77.14 yesterday.

The British pound dropped 0.9 percent against the greenback as traders digested May's Sunday announcement that she plans to start negotiating an exit from the EU by the end of March next year. Investors latched on to May's comments that curbing immigration would be a priority, stoking speculation the UK could leave the single market altogether.

"Her comments on curbing immigration and reclaiming sovereignty may, as a quid pro quo, imply limited access for Britain to the EU’s single market," Bank of New Zealand currency strategist Kimberly Martin said in a note. "The GBP/USD was under pressure early in the evening as the market appears to be forming the view that British PM, May, is intent on implementing a ‘hard Brexit’."

The kiwi was little changed at 72.67 US cents from 72.65 cents yesterday, with the US ISM manufacturing survey beating expectations and traders increasingly expecting the Federal Reserve will raise the federal funds rate in December.

Traders will be watching the pace of house price inflation in today's New Zealand property value data for any signs the Reserve Bank's curbs on mortgage lending are chilling the market, which would free up governor Graeme Wheeler to cut rates later this year. Wheeler will give an off-the-record speech to the Northland Chamber of Commerce in Whangarei today.

The GlobalDairyTrade auction overnight will be also be watched to gauge the pace of recovering dairy prices.

The kiwi slipped to 94.71 Australian cents from 94.94 cents yesterday ahead of the Reserve Bank of Australia's first policy review under governor Philip Lowe.

The local currency was little changed at 4.8460 Chinese yuan from 4.8453 yuan yesterday and edged up to 73.80 yen from 73.64 yen. The kiwi was little changed at 64.79 euro cents from 64.65 cents.

(BusinessDesk)

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