Political and Economic Uncertainty plagues the Pound
Politicians with their own agenda are the direct cause of Sterling’s current value against the New Zealand Dollar. First Cameron calling for the referendum, thinking the UK would vote to remain, then Boris jumping on the leave campaign with Farage and lastly Theresa May calling a snap general election and failing to gain a majority victory.
We are now witnessing the direct consequences of a vote to leave the EU. We have seen a rapid rise in UK inflation at one point hitting 2.9%. There were rumours if the rise continued there would be a rate hike by the Bank of England. This had helped the Sterling rally against the New Zealand Dollar. The latest inflation data was then released at 2.6% and the pound lost value as a result.
I am of the opinion this is a good thing. Inflation is closely correlated with average wage growth. A healthy economy requires the two to be as close to in sync as possible. This is currently not the case in the UK with average wage growth some way behind inflation at 1.8%.
Brexit negotiations will be a key factor in GBP/NZD levels over the foreseeable future. In order for Sterling to make any significant gains we need a stable government in place and the stance on Brexit needs to be made clear. The “have your cake and eat it plan” needs to be dropped. Compromises will have to be made on the freedom of movement of people in order to have free trade. This goes against one of the major reasons that voters chose to leave and would cause public uproar. Which is why I think compromises will be made, but drip fed to soften the news. This does not bode well for Sterling.
RBNZ hold off on rate hike
The New Zealand economy is currently strong, New Zealand’s largest export dairy is healthy. The Reserve Bank of New Zealand have stated recently their reluctance to raise interest rates as a weak New Zealand Dollar boost exports. Perhaps, the only saving grace.
If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker when the market is currently so hard to predict. If you let me know the details of your trade I will endeavour to produce a free trading strategy to suit your individual needs. Have faith knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving. I can be contacted at [email protected] . (Daniel Johnson) Thank you for reading.