Pound Turns Weak after Lack of Consensus on Brexit Bill

British MoneyIn one of our previous blog posts, in 2017, we had predicted downgrade in the GBP/NZD currency pair. We had also recommended traders to open a LONG position near 1.8860 and purchase a CALL option.

After one week, the currency pair was trading at 1.9150 levels and all our traders were able to book their profits in both trades.

Last week, the currency pair hit the high figure of 1.9528 and is now trading at 1.9390 levels.

Now, we anticipate GBP/NZD currency pair to decline and the reasons for the same is discussed below.

The Prime Minister of UK, Theresa May, on Monday, received the approval from her minister for increasing the Brexit bill offer, so as to break the deadlock in negotiations with European Union. But the PM is not expected to give the final figure of the offer bill. As per EU, they have demanded an amount of €60 Billion to be paid for the exit bill. David Davis, the UK negotiator has called upon European Union for compromise.

It is to be noted that Brexit bill is the main hindrance for a smooth and quick exit. Micheln Barnier, the chief negotiator of EU has given 14 days deadline for providing clarity on the Brexit Bill. He has also warned that contingency plans are already prepared in the event if the Brexit talk collapses. Apart from that, UK Prime Minister is also facing a crucial problem from political uncertainty in Germany. Some German legislators might create a hard Brexit for the United Kingdom by holding off concessions.

Regarding high inflation rate in the UK, the main reason for the hike was due to weak Pound. Since 2015, there has not been any change in the domestic service inflation rate. Most of the inflation was primarily due to imports which became expensive. In the past few weeks, Pound has strengthened and it is expected that the inflation rate would come down.

Hence, there is no need for Bank of England to increase the interest rates in 2018. While these latest developments could make Pound bearish, it is likely that Kiwi dollar would strengthen as per Dennis Tan who is the analyst at Barclays.

CGTN America

The sentiments of the market have turned bearish towards Kiwi Dollar after a change in the mandate of Reserve  Bank of New Zealand towards including employment, cutting in the number of working visas for migrants and proposed restrictions on foreign ownership of residential property.

However, Dennis Tan is the opinion that the new economy would be able to expand in a healthy manner due to the planned expenditure policies of the new coalition government. There is a drastic drop of 4.6% in the unemployment rate in the month of September 2017. In April 2018, it is expected that the minimum wage would rise to $16.50 from the existing $15.75. Hence, a downtrend in the currency pair GBP/NZD is likely in the near future.

GBPNZD Pair Nov 23rd 2017

GBPNZD Pair Nov 23rd, 2017

The price chart is showing a resistance for the currency pair at 1.9430 and the balance volume indicator is on the decline. Apart from that, William Vix-Fix Indicator is more than the recent high zone. This clearly shows an increase in selling pressure. Hence, traders are recommended to invest in a short position in GBP/NZD.

In the currency market, traders should open a SHORT position around 1.9420 and place stop order loss above 1.9480. This position would be covered when GBP/NZD falls to 1.9080.

Similarly, in the binary market, the traders should buy put option in order to gain from this probable downtrend in the currency pair. Traders are recommended to set the trade expiry period for one week and strike price around 1.9420 is perfect for this trade.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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