The Pound to New Zealand Dollar exchange rate remains at some of the higher levels we have seen since the Brexit vote in June 2016. Since that date GBPNZD has been trading between 1.68 and 2.05, current levels of 1.93 are therefore on the whole, quite encouraging.
Expectations are now forming for the Pound to struggle in the months ahead as Brexit concerns continue to weigh on the UK and Sterling. However, the recent slide in the value of Sterling has been offset by the weakness present in the New Zealand Dollar.
Earlier this month the RBNZ, Reserve Bank of New Zealand, lowered its growth forecasts and economic outlook, pushing back interest rate hike expectations until perhaps 2020. The recent rise of the US Dollar has also weighed on sentiment towards the New Zealand Dollar as investors prefer the more stable and higher yielding US currency.
Global fears over Turkey, the possible contagion and a potentially negative effect on the global economy have also weakened the Kiwi, leading to concerns that it might lose more ground in the future. Investors have been shunning all perceived ‘riskier’ currencies which has seen the Kiwi remain out of favour.
Despite Sterling hanging on the precipice in many respects, the absence of any new bad news has actually been good news for the Pound this week. Economic data this week has been mildly supportive with Unemployment falling and Inflation rising. This could set the pace for a further interest rate hike down the line but there are still much wider concerns.
I predict GBPNZD will remain in a fairly tight range for the rest of this week, above 1.90 but struggling to make any dramatic advances above 1.95. Further deterioration in the Turkish situation could easily derail the Kiwi but for now the immediate danger seems to have settled down.
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