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Pound New Zealand (GBP/NZD) Exchange Rate Rises as ‘Kiwi’ Traders Worry Over RBNZ Interest Rate Cut

May 21, 2019 - Written by John Cameron

GBP/NZD Exchange Rate Increases as NZ Growth Concerns Rise

The Pound New Zealand Dollar (GBP/NZD) exchange rate edged higher today and is currently trading around NZ$1.956 on the inter-bank market.

The New Zealand Dollar (NZD) fell against the Pound (GBP) as ‘Kiwi’ traders become increasingly skittish on fears that the Reserve Bank of New Zealand (RBNZ) will cut interest rates.

Analysts at the ANZ commented:

‘While lower interest rates (and the recent depreciation of the NZD) will support growth, we think a little more stimulus will be required to see inflation lift sustainably to the RBNZ’s target mid-point.’

As New Zealand’s economy is so tightly tied to Australia’s the announcement by the Reserve Bank of Australia’s (RBA) Governor, Philip Lowe, that Australia could see an interest rate cut as early as June has also weighed on confidence in the ‘Kiwi’.

US-China trade tensions are also proving a drag on the New Zealand Dollar, with Wang Yang, a Politburo Standing Committee member, saying that in a ‘worst case scenario’ the trade war could slice 1% from Chinese growth.

GBP/NZD Exchange Rate Edges Higher as May to Deliver Speech on ‘New’ Brexit Deal

The Pound, meanwhile, has benefited from Theresa May announcing that she will deliver a speech on her ‘new and improved’ Brexit deal today at 4pm.

May told her cabinet today:

‘The withdrawal agreement bill is the vehicle which gets the UK out of the EU and it is vital to find a way to get it over the line.’

The Chancellor Philip Hammond has, however, heightened concerns over the possibility of a no-deal Brexit, saying that many hard-Brexit MPs were using the referendum result to push their cause, pulling the UK closer to a chaotic exit.

The European Elections are also remaining in focus for some Sterling traders, with concerns rising that the Brexit Party could challenge the two major parties – Labour and the Conservatives – and further exacerbate uncertainties surrounding the future of the UK’s relationship with the EU.

GBP/NZD Outlook: Brexit Developments to Remain in Focus

There are no notable New Zealand economic data releases tomorrow, with many ‘Kiwi’ traders focusing on global trade developments instead – and with any signs of a compromise between the US and China, this could provide the ‘Kiwi’ with some much-needed uplift.

Pound traders, meanwhile, will be awaiting tomorrow’s publication of the UK Consumer Price Index figures for April, which are expected to improve.

Tomorrow will also see the publication of the UK retail price index figures for April.

The Pound New Zealand exchange rate, however, will most likely be driven by Brexit developments over the course of the week, and with any indications from May that she could potentially succeed with her ‘new’ Brexit deal, Sterling could rise.

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