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Pound New Zealand Dollar Forecast: RBNZ Rate Cuts Could Recover GBP NZD from Record Lows

New Zealand Dollar Currency Forecast

Pound New Zealand Dollar Exchange Rate Ends Week Near Record-Lows

After attempting to surge higher at various points in Friday’s session, the Pound New Zealand Dollar exchange rate eventually sank back down to the week’s lowest levels – and GBP NZD’s record lows.

An increase in demand for risky currencies thanks to some underwhelming US data allowed the risky ‘Kiwi’ to benefit, despite RBNZ rate cut bets limiting the currency’s advances.

British inflation scores for September will be published next week, but as the Bank of England (BoE) has already said it will overlook inflation increases caused by GBP’s drop in value, and as such GBP may not benefit from any inflation increases any time soon.

(Published 13:22 BST 14/10/2016)

The Pound New Zealand Dollar exchange rate hit new record lows of 1.71 once again on Friday morning, a trend that has already occurred multiple times since the UK voted to Brexit. Could the high likelihood of more monetary easing from the Reserve Bank of New Zealand (RBNZ) allow Sterling to make a sustained recovery, however?

Pound (GBP) Limp as ‘Hard Brexit’ Worries Take over Trade

In the last week, Sterling has remained near 2016 lows across the board. Despite hitting levels of key psychological support and staying near its cheapest levels the currency has seen no real recovery attempt.

This has been partially due to a total lack of supportive economic UK data in the quiet data week, but was largely because the UK government continued to indicate that a ‘hard Brexit’ would become reality.

Markets have held out hope since the Brexit vote that Britain could somehow keep access to the European Union’s single market after leaving the bloc, but repeated warnings from EU officials and indications of admission from UK leaders have begun to show investors the reality of the vote.

New Zealand Dollar (NZD) Bounces from Selloff on Risk Demand

The New Zealand Dollar spent most of the last week being sold across the board after hitting key highs in early-October. Expectations of further monetary easing from the Reserve Bank of New Zealand (RBNZ) have also left the ‘Kiwi’ weaker.

However, even the weak ‘Kiwi’ was able to benefit slightly from the week’s risk-rallies. Demand for risky assets has surged due to steady market conditions in the US, as US Presidential election bets lean strongly towards the ‘safe’ option for markets – Democrat Hillary Clinton.

Pound New Zealand Dollar 2016 Forecast: RBNZ Expected to Ease Monetary Policy Further

The coming week could see Sterling attempt recovery, if ecostats such as retail sales and unemployment impress enough to influence markets to pile into the currency from its cheapest levels.

However, over the coming months ‘hard Brexit’ concerns are likely to continue weighing on Sterling appeal, assuming markets continue to give up hopes that the Brexit could still somehow be avoided.

GBP NZD could still rise away from its lows though. Prices of oil are sturdy, leaving CAD stronger, while hopes of a long-term monetary policy freeze in Australia leaving the ‘Aussie’ bullish. As a result, the New Zealand Dollar is currently the loser among the commodity-bloc trio.

Sentiment towards the ‘Kiwi’ could dip further if the Reserve Bank of New Zealand (RBNZ) not only cuts monetary policy in the coming months (as expected) but also hints that more cuts are on the way.

Part of the New Zealand Dollar’s appeal is the RBNZ’s high overnight rate, but if this rate continues to be cut the Pound New Zealand Dollar exchange rate could see a solid recovery as NZD plunges.

At the time of writing, the Pound New Zealand Dollar exchange rate trended at around 1.72, while the New Zealand Dollar Pound exchange rate traded near 0.58.

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