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NZD to GBP Exchange Rate Rallies as RBNZ Holds Fire on Interest Rate Hike

Published: 22 Jun at 4 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, New Zealand Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates,

The Reserve Bank of New Zealand (RBNZ) has caused the latest New Zealand Dollar appreciation. After news emerged that the RBNZ had left interest rates at 1.75%, the New Zealand Dollar spiked up against the Pound.

According to Kiwibank Chief Economist Zoe Wallis, this was because;

‘The market was expecting stronger language on the exchange rate and failure to deliver that has sent the New Zealand dollar higher. It appears that the bank isn’t too perturbed by the rally in the currency given that export prices have also risen’.

RBNZ Governor Graeme Wheeler offered an optimistic forecast to close the event, declaring that;

‘The growth outlook remains positive, supported by accommodative monetary policy, strong population growth, and high terms of trade. Recent changes announced in Budget 2017 should support the outlook for growth’.

Looking ahead, the next high-impact NZ news will be Monday’s trade balance result for May. The previous figure showed a surplus of 578m, so if the surplus grows then the New Zealand Dollar may appreciate further.

The Pound’s latest weakness against the New Zealand Dollar comes during a key stage of the Brexit process.

With talks finally underway, Prime Minister Theresa May has departed for Brussels to lay out her government’s position.

The meeting with EU officials is expected to be a multi-stage process, with May following the initial talks with her plans to deal with the migration crisis that continues to impact the European Union.

The concern is that May could end up politically isolated from her EU peers regardless of plans, as was seemingly the case when the PM attended an EU summit in December 2016.

More imminently, the Pound may stage a belated rally against the New Zealand Dollar on Friday. While not scheduled as an announcement, it is possible that the Conservative Party could finally confirm that it has reached an agreement with the Democratic Unionist Party (DUP).

Since the general election on June 8th, the UK has been without an official government, so any news that this has changed for the better may trigger a sharp GBP NZD rise.

According to unnamed DUP sources, talks are around ‘95% there’, so a confirmation on Friday is not out of the question.
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