New Zealand Dollar exchange rates have rallied sharply overnight following the latest Reserve Bank of New Zealand (RBNZ) interest rate meeting.
NZD exchange rates have strengthened nearly 1.5% as the RBNZ held interest rates at 1.75%. This move was expected but it was the accompanying statement that caused the New Zealand Dollar to rally sharply.
Upbeat statement causes NZD strength
In the post decision statement many analysts were expecting a relatively dovish tone to come from the minutes with most analysts expecting a series of interest rate cuts on the horizon. However the statement was far more upbeat with longer term projections actually suggesting a potential rate rise with a freeze of rates until 2021.
This has brought to a halt the recent rally for the pound which had climbed from 1.87 in early February to peak at just below 1.92. It also highlights how volatile the market can be and the impact this can have on an international money transfer. On a £300k transfer to New Zealand between the high/low rate of exchange in the last week the difference is a staggering $15,000 NZD.
Is this the end of the GBP/NZD rally?
For me I still feel it is likely the pound will have a stronger year and particularity against the riskier currencies such as the NZD, AUD and ZAR. If we can make a break though regarding Brexit (a big if I know) then the pound is likely to see some significant support. I also feel the sentiment from the RBNZ was maybe there to mask over the recent issues seen for the New Zealand economy. Growth has been steadily falling and tensions between New Zealand and China growing as New Zealand has lost its favoured status with the Chinese political leadership following the Government decision to rule Huawei out of the 5G mobile build.
China is the second biggest trading partner for New Zealand (behind Australia) and on-going tensions will not be good for future business. My take on this is that the recent blip for sterling maybe short lived and I would look for the pound to push back over 1.90 in the short-medium term.
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