Strong Kiwi could be a reason to cut

The big focus for the New Zealand Dollar is this week’s interest rate decision on Wednesday evening. Whilst it is unlikely we will see any actual shift in policy, ie a cut. There might be some jawboning from Governor Wheeler to try and weaken the currency. Jawboning is the process of talking up or down a currency to trigger currency movement. By saying he might wish to cut if certain conditions are met Wheeler might influence movement on the Kiwi.

Despite having progressively cut interest rates from 3.5% in Summer 2015 to the 1.75% on offer today the currency remains strong as investors take advantage of what are in the global sense, still very high and attractive interest rates.

There are some other arguments as the New Zealand economy is performing slightly worse. GDP slowed recently to its slowest pace of growth since July 2015 last week coming in at 2.7% versus the 3.2% expected. The likelihood of any actual cut is slim but the Governor will be keen to see off a stronger Kiwi as it harms their economy. The New Zealand economy relies heavily on exports, mainly Dairy produce and as such a weak currency helps support the economy.

Pound to New Zealand Dollar forecast

Wednesday’s interest rate cut is in the evening so speaking to us before then is sensible. Currency markets can move very quickly in uncertain times and we can help you to take advantage of such quick movements. A limit order for example would enable you buy currency at your desired exchange rate if it is reached outside of office hours.

Kiwi buyers with Pounds might also find they get some respite on Tuesday as we see the latest release from the GDT (Global Dairy Trade). At the last auction prices dropped between 5 and 10% on dairy products New Zealand exports, they fell 3% at the previous auction. With improvements in Dairy technology and processing globally, this global price has suffered which reflects badly on the New Zealand currency as it depends on high GDT prices to support their dairy focused export economy.

All of the events above may help to offer some respite for Kiwi buyers but overall I believe it will do little to shake investor’s perception of the Kiwi as a very important currency to hold. With key developments on Brexit just around the corner clients looking to buy Kiwi Dollars with Pounds would I feel be best to lock in on any higher prices to avoid what seems like a market that will continue to favour the New Zealand Dollar.

If you have an upcoming requirement for the New Zealand Dollar, dont hesitate by getting in touch with us to detail your needs. Taking advantage of spikes in the market could make a huge difference to your buying or selling power. Call us on 01494 725 353 or email me here for more information.


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