Pound Sterling to New Zealand Dollar Forecast Influenced by 'Brexit'

June 29, 2016 - Written by Toni Johnson

STORY LINK Pound Sterling to New Zealand Dollar Forecast Influenced by 'Brexit'

The Pound has failed to remain strong today, due to BoE comments raising the odds of a rate cut.

Sterling has triumphed against the New Zealand Dollar of late, with the continued relief-rally supporting the Pound in an unusual two days.

Brexit Fallout has Seen the GBP NZD Exchange Rate Struggle

Last week’s game-changing decision by the UK electorate to leave the European Union has had far-reaching effects across the world’s developed economies.

Calming words from current UK Prime Minister David Cameron during a visit to Brussels yesterday, insisting that his nation now wants to forge the ‘closest possible’ links with the EU, had some effect in stemming the recent losses for the Pound Sterling (currency : GBP). However, in the medium term, last Thursday’s vote for Brexit will alter the forecast for the future performance of various major global currencies.

The New Zealand Dollar (currency : NZD) has performed strongly against the Pound Sterling (currency : GBP) since the referendum, sending the Sterling Kiwi exchange rate sharply downwards from above the 2.0600 GBP NZD threshold in the hours before the result of the vote was announced. The pair has continued to track lower, plunging into the 1.8600s this week – its lowest level for over three years – as investors abandoned the UK unit.

Will NZD Appreciation Provoke RBNZ Into Cutting Rates?

However, comments from New Zealand’s Finance Minister and Deputy Prime Minister Bill English contained in a print interview yesterday, apparently place these near-term gains for his nation’s currency under threat.

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English suggested that if the economic effects of the UK’s Brexit vote are severe, then New Zealand is, ‘in a very small group of countries - the others being Iceland, South Korea and Australia - that have got a combination of reasonable government finances, a reasonable growth path, and room for interest rates to move.’ English went on to emphasise his point by asserting that the situation, ‘makes you realise how few tools other countries have.’

Analysts forecast that the suggestion from English that the Reserve Bank of New Zealand (RBNZ) may consider further cutting its already record low benchmark interest rate from its current level of 2.25% at its 11th August policy meeting has the potential to propel the Pound Sterling New Zealand Dollar exchange rate back up towards the two to one threshold once more.

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TAGS: New Zealand Dollar Forecasts Pound New Zealand Dollar Forecasts Poun Forecasts