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NZ dollar gains vs pound after report May to signal Brexit intent

Monday 16th January 2017

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The New Zealand dollar gained against the British pound after a report that UK Prime Minister Theresa May will signal her intention to drive ahead with plans to exit the European Union.

The kiwi dollar rose to 59.18 British pence as at 8am in Wellington from 58.44 pence in late New York trading on Friday. The local currency traded at 71.09 US cents from 71.27 cents at the end of last week.

May is scheduled to give a speech on Tuesday which the Sunday Times reported would signal plans for a "hard Brexit", trading off membership of the tariff-free zone for the right to curb migration and forge separate trade deals with other regions and nations. PM Bill English flagged New Zealand's interest in a new trade deal with the UK after a meeting with May. The pound dropped to its lowest level in more than two decades after the Times said May will use her speech to say the UK needs to "get on and make Brexit happen",  a move some say will damage the British economy.

"This ‘hard Brexit’ scenario has largely been priced by markets with the pound falling around 20 percent since the Brexit vote, although further falls could be on the cards depending on Theresa May’s speech," said Peter Cavanaugh, an adviser at Bancorp Treasury Services. 

US financial markets are closed on Monday for Martin Luther King Jr. Day. Globally, two speeches by Federal Reserve chair Janet Yellen, the inauguration of US President Donald Trump and a slew of corporate earnings including from Morgan Stanley and Citigroup, the Federal Reserve's Beige Book survey, and the European Central Bank's policy review will draw the focus in the coming days. New Zealand economic releases this week include the food price index for December, which will help economists conclude their inflation forecasts for the fourth quarter, surveys of business and consumer confidence and building consents for November.

The trade-weighted index slipped to 78.22 from 78.30.

The kiwi fell to 94.79 Australian cents from 94.98 cents on Friday in the US. It fell to 4.9041 yuan from 4.9152 yuan and fell to 81.17 yen from 81.63 yen.

The local currency was little changed at 66.94 euro cents from 66.98 cents.

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