The RBNZ have announced an unplanned update for tomorrow which could see them cut interest rates, GBPNZD exchange rates could benefit from these changes.

RBNZ introduce lending limits

The Reserve Bank of New Zealand yesterday revealed they will be introducing property cooling measures that take effect from the 1st September. Bank lending to anyone looking to invest in residential property with a deposit of less than 40% will be limited to 5%. Whilst no more than 10% of a bank’s lending can be given to buyer-occupiers with a deposit of less than 20%. This will obviously go some way to helping cool the property market by reducing the amount of lending by essentially pricing prospective buyers out the market.

The Reserve Bank will tomorrow will provide an unplanned update where it seems very likely they will set out their intentions to cut interest rates. The RBNZ are looking to increase the inflation level in New Zealand which has fallen below the Monetary Policy Committee’s mandated 1-3%. A rocketing housing market would be at even further risk if there was an interest rate cut due to borrowing costs becoming cheaper. Therefore the new housing measures should help to limit the reaction and slow down the speed that property is getting purchased in New Zealand.

Inflation keeps falling

At the start of the week New Zealand inflation was reported to be 0.1% lower than the expected 0.5% when compared to this time last year. Low inflation levels coupled with a very strong currency look set to be enough to force the RBNZ’s hand.

If you’re a New Zealand Dollar seller it would be good to get in touch with your broker as soon as possible. The likelihood of a rate cut is already starting to raise the GBP/NZD rate. The decision will be made on the 11th August and I would not be surprised to see the NZD move towards the 2.00 level in the meantime.

Thank you for reading my New Zealand currency report, if you have any questions about NZD exchange rates I would be more than happy to discuss them – you can contact me with any queries at brf@currencies.co.uk.

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