This New Zealand Dollar report will address the factors that are likely to affect exchange rates in the short term if you are buying abroad or making a currency transfer. You will see in the below table the difference in NZD you would have achieved when buying £200,000 during the last month.
|Currency Pair||% Change||Difference on £200,000|
Overnight the RBNZ (Reserve Bank of New Zealand) kept their base interest rate on hold as widely expected. This has seen the New Zealand dollar edge slightly higher near 3 month highs against the pound. The result is what markets were largely expecting hence the lack of any serious shift in the GBPNZD currency pairing.
Graham Wheeler did make a lacklustre attempt at jawboning the currency – trying to artificially weaken the currency - by referring to its recent strength, but the overall language was clearly neutral. With the position of the RBNZ remaining ‘accommodative’ the prospect of cuts down the line remains but we would need to see large shifts in sentiment towards the New Zealand economy and the region.
The New Zealand dollar retains strength against its counterparts owing to the higher interest rates relative to other currencies. Many leading economies have interest rates below or close to zero, the Kiwi dollar therefore represents a good investment because of its higher yield.
With the possibility of any rate cuts off the table (which might have weakened the NZD) if you need to buy New Zealand dollars with pounds you should be treading very carefully. The political and economic uncertainty holding back the pound does not seem to me like a scenario which is likely to bear too much good news for clients waiting to buy New Zealand dollars with pounds.
I feel the general position favours NZD sellers and with no important fresh economic data for New Zealand this week or even next, I expect GBPNZD rates will in the main be driven by developments on the pound, which looks like it will continue to struggle. Depending on how UK political developments go, the 2017 low of sub 1.70 could be under threat.
One potential saving grace is Chinese economic data in the form of Manufacturing PMI (Purchasing Managers Index) data next week. Earlier in the year concerns over Chinese PMI data did see the NZD and AUD sold off. However more recent data on exports and imports from China point towards the Chinese economy performing well and as such NZD buyers should be very careful in holding off too much since their position could easily deteriorate further.
Thank you for reading today’s NZD report, I would be happy to respond directly to any queries you may have about an upcoming currency transfer. Feel free to get in touch here.
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