Sterling and New Zealand Dollar Race to the Bottom (Ben Fletcher)

GBP EUR Exchange Rate: Weekly Review July 16  

The GBP/NZD rate is currently in a strange predicament where both currencies are facing a potentially imminent interest rate cut from their central banks. The Bank of England and the Reserve Bank of New Zealand have both indicated that there could be cuts very soon. The Reserve Bank having called an early meeting last week raised the probability of a cut and this has now essentially been priced in.

The Bank of England having decided not to cut rates at the last opportunity due to there not being enough post Brexit evidence of a domestic slowdown may have it now. The PMI data released last week was the lowest in several years and this could provide the proof. Whilst it may not result in a rate cut there could almost certainly be some form of economic stimulus which could have the same effect and Sterling weaken.

Essentially when the interest rate is cut in a country the currency weakens as investors with large sums relinquish their positions. Anyone with funds in a bank will receive less after there has been an interest rate cut and investors would have to look for returns elsewhere.

Considering Sterling and the NZD are both facing the same fate it is hard to know which way the rate will move. The Kiwi has already dropped nearly 10 cents in the last 2 weeks of the back of a cut looking likely. The RBNZ almost look certain to act and the BoE could hold off once more. In my opinion the GBP/NZD could start to move towards the mid 1.90’s in the next few weeks so if you’re looking to sell NZD I would consider acting sooner rather than later.

As a trader in a currency brokerage I am able to help you achieve the best rates possible, whilst also assisting with the timing of a transaction to make sure you get the most for your money. If you do have a currency requirements please feel free to send me Ben Fletcher an email at [email protected].