Downside Forecast for Pound New Zealand Dollar Exchange Rate GBP NZD

December 10, 2015 - Written by Toni Johnson

STORY LINK Downside Forecast for Pound New Zealand Dollar Exchange Rate GBP NZD

GBP to NZD Exchange Rate Trading Close to 2.2300 Today

Most analysts had anticipated that last night’s policy announcement would yield a 25 basis point cut from the Reserve Bank of New Zealand (RBNZ).

The Kiwi central bank’s decision to trim its Official Cash Rate from 2.75% down to 2.50% therefore came as a surprise to few investors, however, the price action for the New Zealand Dollar (currency : NZD) which followed the announcement certainly did confound expectations.

The Sterling New Zealand dollar exchange rate had been trading at close to the 2.2900 GBP NZD threshold in the lead-up to the Kiwi central bank’s decision, but this afternoon’s trading session has seen GBP NZD drop to close to the 2.2300 threshold in spite of the announcement of a looser policy stance from the RBNZ.

Positive RBNZ Quarterly Policy Statement Supports NZD Demand

The reason for the renewed support for the Kiwi emanates from observations contained in the RBNZ’s quarterly policy statement, which was released at the same time as the decision.

Graeme Wheeler, RBNZ Governor, noted in the memo that, ‘concerns about a hard landing in Chinese growth have reduced since September – in part due to further easing in monetary and fiscal policies by the Chinese authorities. That said, considerable uncertainty remains about the global outlook, and especially so for China and the rest of Asia. The risks remain skewed to the downside.’

Analysts Predict Further Downside Risks for GBP to NZD Exchange Rate

Analysts pounced on Wheeler’s assertion that action by China’s authorities is supporting level of economic activity in the Asian economy and the Kiwi Dollar was supported as a result.

The RBNZ’s assessment of the domestic economy provided further grounds for optimism for Kiwi-holders.

The policy committee noted that, ‘exports of services have increased strongly over the past year. Most of the increase represents increasing tourism activity, with overseas visitor arrivals growing strongly from a range of countries.

In addition, the number of international students has increased significantly. The depreciation of the exchange rate over 2015 is improving the competitiveness of New Zealand’s service export industries.’

Analysts forecast that there could be further downside to come for the GBP NZD exchange rate.

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TAGS: Pound New Zealand Dollar Forecasts Pound Sterling Forecasts