The kiwi has surrendered a lot of ground against sterling since the summer with New Zealand dollars now 2% cheaper than levels seen back in mid-August. The rise reflects the market’s caution around the NZD with the leading Labour/New Zealand First coalition continuously failing to rekindle any kind of sustainable appetite for the kiwi since they took power in September of last year. More on political factors impacting the New Zealand dollar and an outlook on potential monetary policy changes from the Reserve Bank of New Zealand in the market report below.
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The suggested 20% rise in minimum wage and combination of corporate tax cut cancellations, along with the push for a revised Government welfare plan seem to have chocked business confidence for the foreseeable future with the most recent surveys posting its lowest readings since 2009.
The readings could prove pivotal as it looks ever more likely the Reserve Bank of New Zealand may be forced into an interest rate cut in a bid to jump start the economy onto a more positive path. At a time when other central banks around the world push on with aggressive rises, investors may well be tempted to drop their positions in the Kiwi to secure higher returns abroad. The potential of this gap widening on the international scene certainly presents a real risk of anchoring the NZD’s value long-term.
Personally, I believe the RBNZ’s forced hand may already have been factored in by the markets, and feel this trend will have contributed greatly to sterling hitting highs just above the 2.00-mark last week. As such, I can’t really see sterling gaining much more ground, particularly in the short term with Brexit clouds still looming.
Last night’s commodity price index release has provided further concerns for the kiwi as we come into the second half of the week, with global dairy prices continuing its fall from last month. This release has certainly allowed sterling to push higher this morning. Those looking to purchase New Zealand dollars may want to consider their options and capitalise on current levels.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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