Pound to New Zealand Dollar Exchange Rate Recovering; NZ Interest Rate Decision Looms
The Pound to New Zealand Dollar exchange rate is presently trending lower at 1.9427, as the Pound continues to tumble in the currency market against other majors. The Pound has slumped following a poll signalling that Scottish ‘yes’ voters opting for a break away from the UK are currently holding the majority of the vote at 51%, in comparison to 49% who wish to keep Scotland within the UK.
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The New Zealand Dollar however could experience some volatility on the outcome of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Wednesday, which is presently forecast to remain at 3.50%. The New Zealand interest rate has witnessed many hikes this year as the economy flourished, however the last interest rate hike in July saw the RBNZ state that they believed the New Zealand economy needed to undergo a ‘period of assessment’ before any more hikes were actioned.
Economist Robin Clemens commented: ‘Having signalled a pause in July, and the data-flow since being supportive of such a move, the RBNZ is almost certain to leave the OCR [Official Cash Rate] unchanged at 3.5%. We expect there to be uncertainty as to the length of the ‘period of assessment’ but that it is still expected that rates will need to “adjust further to a more-neutral level.”’
The Reserve Bank of New Zealand are also likely to maintain their current official cash rate until the election due on September 20th passes. Westpac economist Dominick Stephens suggests: ‘The best course available to the RBNZ is to “kick the can down the road” until the election has passed. The RBNZ can tackle the market head-on in December, if the data still warrants.’
The Pound conversely has experienced a turbulent ride in the currency market in the latter few months. After rising in popularity amongst investors with the Bank of England stating interest rate hikes were closer than many thought, the Pound has since depreciated against its peers as the Bank of England demonstrate a dovish tone, and forecasts for the timeframe of rate hikes continually gets set back. The previously predicted November for interest rate increases was initially pushed back to the other side of Christmas, predicted to materialise in the first quarter of 2015; however, now economists are forecasting May as more feasible.
The Pound seems to have suffered as the Bank of England offer little enthusiasm for rate hikes in the near future and now the Scottish Referendum appears to be swamping Sterling’s ability in its exchange rates.
With such uncertainty surrounding the Pound’s fate following a ‘yes’ vote, and indeed Sterling’s value until the Referendum has ended looking precarious, any hopes for any major changes—regardless of positive UK figures—in the near future appears hopeless.
Expert in the field Derek Halpenny stated: ‘There seems to be plenty of scope for further Pound declines given the pronounced degree of uncertainty and unknowns related to a break up. A “Yes” victory is still hardly priced in as this only has become a focus since the middle of last week when we had the first surprise poll. I see little upside for the Pound now though [until the results].’
The possibility looms that the Pound could lose up to 10% of its value in the face of an independent Scotland leaving the UK. Investors however are expected to lose favour in the Pound in the run up to the vote. Currency expert Simon Derrick commented: ‘Given the importance of the vote on September 18th, the narrowness of the gap between the two camps and a market that, to date, has largely assumed that a “No” vote was by far the most likely outcome, the danger is that the next few days sees a rush of by investors to hedge their risks.’
As the debate continues the Bank of England has made contingency plans for the eventuality of Scotland leaving the UK; however, Prime Minister David Cameron has stated that he has made no back-up plans of any kind.
The future of the GBP to NZD exchange rate is likely to favour the ‘Kiwi’ in the near future as the Pound looks destined to decline further in the market and perform poorly against other majors. The New Zealand commodity currency however will be affected by changes to commodity prices and the Reserve Bank of New Zealand’s official cash rate decision this week.
The Pound to New Zealand Dollar exchange rate clawed back some of its previous losses on Tuesday as New Zealand’s Retail Card Spending report came in slightly short of forecasts.
Retail Card Spending had been forecast to increase by 0.6% in August month-on-month but it actually rose by 0.5%. Total card spending was up 0.3% on the month. Meanwhile, the Pound derived some support from the British Retail Consortium’s Like-for-Like sales report. The 1.3% annual increase was considerably more than the 0.3% gain expected. Today’s UK Industrial Production reports showed a stronger than forecast month-on-month figure. Manufacturing production met expectations. The results could help the GBP to NZD exchange rate trend higher in the hours ahead.