Pound New Zealand Dollar. GBP/NZD Rate Drops Ahead of Reserve Bank of New Zealand Interest Rate Decision

Modified: Tuesday, 8 March 2011 08:54 BST - Written by John Cameron

STORY LINK Pound New Zealand Dollar. GBP/NZD Rate Drops Ahead of Reserve Bank of New Zealand Interest Rate Decision

The Pound New Zealand Dollar exchange rate (GBP/NZD) is 2.1882

The clear-up operation is well underway in Christchurch, New Zealand following last month’s devastating earthquake and whilst the total cost will probably never be known, estimates are that when all externalities have been factored in, the New Zealand economy will have lost NZ$15bn.

The New Zealand government expects these extraordinary costs to have a marked effect on the Kiwi economy, with policy-makers now predicting that the domestic budget will continue to run at an annual deficit until the financial year 2014-15. Growth is also expected to drop considerably, with analysts downgrading their expectations for the increase in NZ GDP to 0.5%, while New Zealand unemployment will rise from its present level of 6.8% to 7.0%.

In the near-term, investors will be looking closely at the Reserve Bank of New Zealand interest rate decision which is announced at 2200hrs UK time tomorrow. It is universally expected that the RBNZ will cut rates from their present level of 3.00%, following a series of comments to that effect by New Zealand Premier, John Key. The unknown factors are how many basis points the central bank will cut by and what the tone of the accompanying statement will be. Many analysts are suggesting that such extraordinary circumstances merit a 50 bps cut, so anything less than this is not likely to further weaken the NZD.

Meanwhile, in the UK, British Retail Consortium sales figures for February, which were released overnight, came out much worse than analysts had anticipated, showing a month-on-month contraction of 0.4% versus expectations of an increase of 0.7% from January’s figure. This number is likely to see the Pound trading on the back foot during today’s session as hopes of UK consumers spending their way out of the current economic slump are placed to one side.

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TAGS: Daily Currency Updates New Zealand Dollar Forecasts Pound Forecasts