The NZD has been making inroads against its major counterparts despite the US rate cut earlier this week. Data releases such as this have tendencies to impede less traded commodity currencies such as the NZD in times of uncertainty.
|Currency Pair||% Change (Month)||Difference on £200,000|
As a result of a first in a decade event, this would typically give rise to market uncertainty and volatility, but the Antipodean currency has been very resilient with it ranking second place in terms of currency strength amongst the G10 countries with only Japan ahead of them.
Next week Wednesday marks the interest rate decision for New Zealand. There has been varying speculation as to what the decision will be, but financial strategist Robert Rennie from Westpac Investment has stated that "The RBNZ (Reserve Bank of New Zealand) will almost surely cut the OCR (Official Cash Rate) by 25bp to 1.25% and signal further easing potential".
The currency markets are also preparing for a rate cut and in similar size to the previous cuts made by the RBNZ which saw interest rates cut from 1.75% at the start of the down to 1.5% and now to potential record lows of 1.25%.
This could be set to affect the strength of the NZD. At the start of this week GBP/NZD interbank (IB) levels were at 1.86 and with GBP falling sharply through further Brexit dilemmas and the NZD strengthening, this currency pairing fell to lows of 1.82, the lowest level seen since December 2018. However, the interest rate decision could pump that figure back up should the RBNZ make a decision that the currency markets had not prepared for.
As a result of strength of the NZD prior to a potentially damaging rate cut, clients holding NZD may wish to discuss their situation with their account manager here at FCD to see when best to transfer your funds.
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