The RBNZ kept interest rates on hold overnight and alluded to interest rates remaining on hold for some time. This could present opportunities for Sterling to make further gains against the Kiwi. The below table provides exchange rate movements for GBP/NZD within the last month.
|Currency Pair||% Change||Difference on £200,000|
The Reserve Bank of New Zealand decided once more to keep interest rates on hold overnight at 1.75%, and the Kiwi was gaining against the Pound in the run up to this widely expected result. The recent gains made against the New Zealand Dollar by the Pound since the announcement of the UK election have been staggering. This was a combination of higher confidence in the Pound but also a weakening effect on the Kiwi, creating vast improvements for buyers.
Just compared to the same time last month a £200,000 is achieving you more than an additional $20,000 as a return.
Previously the New Zealand Dollar had been losing demand with announcements in the US that they would be conducting successive interest rate rises (potentially four times this year), which drew demand away from the Kiwi with the expectation of better profits to be had elsewhere.
Countering this trend, the reason the Kiwi was gaining ground against the Pound in the run up to the middle of the night announcement UK time is because rumours of interest rate hike hints during the monetary policy speech of the RBNZ were circulating. Westpac were the main proponents of this theory.
However, the Bank were fairly dismissive of such calls. The sudden surge in inflation above the acceptable threshold was deemed to be a result of 'temporary factors'. Furthermore key hints were made at the slowdown in the New Zealand housing market. Raising interest rates would make the cost of borrowing higher and likely exacerbate this issue. Whilst markets weren’t expecting a hike in the short-term, mounting confidence of a hike in the medium term has deflated.
With this development the potential for the Kiwi to continuing gaining ground against the Pound has become an unlikely outcome over the next few months (barring a major upset in the UK election).
Greater confidence in the Pound is arguably the dominant narrative, and New Zealand Dollar sellers should be entertaining the idea of selling sooner rather than later, given that current rates are still historically so favourable to move currency back to Sterling. Call us on 01494 725353 or email me here to get a quote.
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