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New Zealand Dollars to Pounds Rate at Highest Since Dec 2018

Market CommentaryNew Zealand Dollars to Pounds Rate at Highest Since Dec 2018
New Zealand Dollars to Pounds Rate at Highest Since Dec 2018
New Zealand Dollars to Pounds.

The New Zealand dollars to pounds interbank exchange rate has reached 0.5423 today at the time of writing. This is its highest in over eight months, or since December 13th 2018.

By comparison, back on May 6th, the New Zealand dollar versus the pound sterling was as weak as 0.5024. So it's since strengthened by close to four cents, or by +7.94%.

This could benefit you, if you're a British citizen selling property abroad in New Zealand, a New Zealander emigrating to the UK, or a kiwi company owner importing British products.

This is because, when you transfer money to your UK bank account, you might now get a higher pound total. This is compared to if you'd exchanged currencies earlier in 2019.

In turn, this would make it more profitable to transfer the money from your New Zealand property sale to the UK, or make it more affordable for you to emigrate to Great Britain this year.

To stay updated with the New Zealand dollars to pounds interbank exchange rate, visit our Rates & Tools page. Here, select 'NZD' to 'GBP' to see the exchange rates for the last week.

Also, to check what's influencing the value of the New Zealand dollar versus British sterling, visit our NZD to GBP Exchange Rate Updates page. Here, simply click on the latest article.

A first factor why the New Zealand dollar has strengthened against the pound is because Boris Johnson's campaign team has suggested that he might call a UK general election this year.

A second reason why the NZD has reached this eight-month high versus the GBP is because New Zealand's inflation increased in Q2, between April and June, said official statistics this week.

Let's look more closely at these explanations why the kiwi dollar has touched this eight-month high versus the pound sterling. You can use this, to decide when to transfer money to the UK.

New Zealand Dollars to Pounds Gains, as Boris's Team Hints at Election

As I mention, a first partial explanation why the New Zealand dollars to pounds interbank exchange rate has reached this eight-month high is because likely next Prime Minister Boris Johnson's campaign team has suggested that Mr. Johnson might call a UK general election, if and when he takes power.

This would be to enlarge the Conservatives Party's majority in Parliament.

Speaking to The Times newspaper on Wednesday 17th July, a senior member of Mr. Johnson's campaign team said that:

"There’s a desire to get this done while [the opposition Labour Party's leader Jeremy] Corbyn is still around. Labour is utterly divided — Brexit is killing them. Labour is in no fit state to fight a general election."

According to The Times, Sir Edward Lister, who would oversee Mr. Johnson’s first 100 days in office at No. 10 Downing Street, wants the Conservatives on an "election footing".

Reportedly, Sir Lister is increasing recruitment for the Tories, and investing in the Conservatives' party headquarters. This is to enable Mr. Johnson to fight a general election later in 2019.

Following these reports, the financial markets have increased the odds that there'll be a UK general election this year up to around 45%. So you could almost flip a coin to know if we'll go to the polls.

It's thought that Mr. Johnson might call a general election if he becomes Prime Minister, first to take advantage of his momentum following entering Downing Street.

Mr. Johnson is a well-known and well-liked figure among the public and media, well beyond most other British politicians. So Mr. Johnson may want to capitalise on this to increase his majority in Parliament, early on.

Second, the ex-Mayor of London might ask voters to go to the polls this year, because the Conservatives' majority in the House of Commons at present is just four MPs. Mr. Johnson is inheriting this slim majority from outgoing leader Theresa May.

So Mr. Johnson might find it tough to pass legislation as Prime Minister, particularly regarding Brexit. This gives Mr. Johnson an incentive to call an election, to make it easier for him to pursue his legislative agenda.

However, while Mr. Johnson could call an election to increase his majority in Parliament, there's no guarantee that he'd get his wish.

According to the latest YouGov polls, the UK's four biggest political parties are polling almost evenly, at around 20-25% each. Namely, these are the Conservatives, Nigel Farage's Brexit Party, the official opposition Labour Party, plus the resurgent Liberal Democrats.

With this in mind, it's possible that the Brexit Party could gain seats at the Tories' expense, if Mr. Johnson calls an election. In this case, the former Foreign Secretary might have to govern in a coalition with Mr. Farage.

Alternatively, the pro-Remain Liberal Democrats and increasingly anti-Brexit Labour Party might win a Parliamentary majority, and change the UK's political direction entirely.

So to conclude, the next Prime Minister could call a general election, to try and increase the Conservative Party's majority of MPs, to easily pursue his form of Brexit.

However, given the UK's fragmented political landscape, there's no telling if the Tories would emerge victorious at the polls. This adds further uncertainty to the UK's political outlook, so has weakened the pound.

NZD to GBP Exchange Rate Rises, as New Zealand Inflation Increases

In addition, another reason why the New Zealand dollars to pounds interbank exchange rate has hit this eight-month high is because New Zealand's inflation increased in Q2, between April and June, said official statistics this week.

According to Stats NZ on Wednesday 17th July, New Zealand's inflation rose to 1.7% in Q2, above Q1's 1.5%, and in line with forecasts.

This has strengthened the New Zealand dollar, because this 1.7% inflation figure is closer to the mid-point of the Reserve Bank of New Zealand's 1%-to-3% inflation target range.

This suggests that New Zealand's economy might now be strong enough to generate consistently higher price pressures, following an extended period where New Zealand's inflation remained around 1.0%.

In particular, New Zealand's inflation rose in Q2, because of higher petrol prices. The cost of fuel increased by +5.8% between April and June, following a -7.0% fall in Q1.

Also, the cost of renting property in New Zealand rose over the Spring by +1.0%, and by +2.5% compared to 12 months ago. Rental costs in New Zealand's capital, Auckland, continue to rise especially quickly.

As a result, New Zealand's central bank, the RBNZ, might be less likely to cut New Zealand's interest rates, below their current 1.5%. This is following the RBNZ's -0.25% cut back in May.

This is because, what with New Zealand's inflation increasing over the Spring, the central bank might not have to reduce borrowing costs further, to stimulate higher price pressures.

The New Zealand dollar strengthens when the RBNZ keeps interest rates steady, because higher interest rates make investing in New Zealand assets more profitable.

In turn, this encourages the world's money managers to place their money in New Zealand, to take advantage of these higher returns. This increases demand for the New Zealand dollar, which raises its value.

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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