RBNZ Cut Interest Rates Again!

GBP/NZD rates have been on the rise for much of 2015 and provided some excellent buying opportunities for those clients holding GBP. At the start of the year Sterling was trading under 2 but by the summer we saw it breach 2.45. To put this in context on a £100,000 GBP/NZD transfer, that is an additional 50,000 NZD. Despite the fact the NZD has moved away from that low, with the pair currently floating around 2.25, I do not expect a sustained recovery and any clients hoping the NZD would gain enough support to push it back towards 2 on the exchange is likely to be left disappointed.

The UK economic recovery has been well documented and although the Bank of England (BoE) have talked down an interest rate rise anytime soon, the Pound has still found enough support to drive it up the current level. Despite Sterling’s improvement much of the movement we have seen on the pair has been down to a weakening NZD. This is due to multiple factors which have caused a slowdown in the New Zealand economy. They’ve seen a drop in exports and this has widened their trade balance figures as a result. They are also feeling the effects of the problems facing China, one of their main trade partners.

Overnight we had the latest Reserve Bank of New Zealand (RBNZ) latest interest rate decision and this proved key, with the central bank cutting their base rate for the fourth time since June. With rates cut to 2.5% I expect that the NZD will continue to find life tough going against the Pound as we head towards the end of 2015. With the Bank of England (BoE) announcing their latest interest rate decision at Midday and BoE governor Mark Carney’s subsequent monetary policy statement, expect further volatility on the markets before close of European trading today.

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