Pound to New Zealand Dollar rates hit by reduced rate hike expectations (Joshua Privett)

Unlike some commodity based currencies like the New Zealand Dollar which are enjoying un-seasonal strength, Sterling has taken another sudden lurch, with Pound to New Zealand Dollar exchange rates dropping back down to the mid 1.70’s.

The root cause? Another change in the interest rate narrative for the UK which has suddenly turned negative.

It’s strange that just a month ago the UK was the closest to raising rates since the financial crisis in 2007/8. The vote split in the Bank of England, governed by the 8 members, was at 5 voting to keep rates on hold and 3 voting for an interest rate hike.

This call for such a significant change in financial policy is largely governed by rising inflation levels in the UK. Inflation is a measure for price rises in the UK, of which the Bank of England can control if it begins to run away from them.

The secondary effect of this is soaring demand for that currency on the currency markets. If holding that currency suddenly brings a higher currency return then yes, demand-side pressure improves.

However, yesterday this inflation data, which had been rising, suddenly took a surprising turn.

Inflation rates backtracked heavily. Immediately discounting new term expectations of a rate hike.

With the New Zealand Dollar benefiting from recoveries in regional demand for goods spurred by Chinese activity – and with investor confidence shaken by a convulsing US political scene – demand side pressure which is now decidedly absent on the Pound side is very visible in the New Zealand Dollar side.

I strongly recommend that anyone with a New Zealand Dollar based currency requirement should contact me on [email protected] to discuss a strategy for your transfer aimed at maximising your currency return.

You can contact me directly by calling 01494 787 478 and asking the reception team to speak to Joshua.

I have never had an issue beating the rates of exchange on offer elsewhere, so a brief conversation could save you significant sums of money on a prospective transfer.