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Pound Reaches 3-Week High Versus Kiwi Dollar, as NZ GDP Growth Slows

Market CommentaryPound Reaches 3-Week High Versus Kiwi Dollar, as NZ GDP Growth Slows
Pound Reaches 3-Week High Versus Kiwi Dollar, as NZ GDP Growth Slows
Image credit: Steven Davies.

Welcome to Pure FX's latest update of the pound to New Zealand dollar interbank exchange rate. This tells you when it's an excellent time to exchange pounds to New Zealand dollars, for your money transfer!

Sterling shoots higher versus the kiwi dollar! The pound to New Zealand dollar interbank exchange rate has hit 1.9258 today, its highest in 3 weeks, or since May 27th.

Hence, this is the ideal time to buy your New Zealand dollars, if you plan to emigrate to New Zealand, or buy a property in the Land of Middle Earth. This is because you'll receive the highest New Zealand dollar total this month.

NZ Dollar Slides, as Kiwi Economy Cools in Q1

The pound has climbed against the New Zealand dollar, because New Zealand's economic growth slowed in the first 3 months of this year, said official statistics yesterday.

To be specific, New Zealand's GDP (Gross Domestic Product) expanded by +0.5% between January and March 2018, according to Statistics New Zealand on Wednesday, compared to +0.6% in the previous quarter.

On a year-on-year basis, kiwi GDP grew by +2.7% in Q1 this year, slower than +2.9% in Q4 2017. This tells us that New Zealand's economy slowed markedly early this year, thus weakening the kiwi dollar.

Kiwi Dollar Falls, as NZ GDP Per Capita Stays Flat

These economic growth figures have dragged down the New Zealand dollar, in particular because kiwi GDP per capita was flat between January and March 2018. This tells us that, even though New Zealand's economy expanded in Q1, New Zealanders’ wealth stayed the same.

This suggests that New Zealand's GDP rise is entirely due to population growth, rather than New Zealanders getting more productive and richer.

As a result, for NZ GDP to rise further, the kiwi population will have to continue growing, unless New Zealand becomes more productive. So this has hurt the kiwi dollar!

New Zealand Dollar Sinks, as RBNZ to Hold Interest Rates at 1.75%

What's more, these GDP growth statistics have also weakened the New Zealand dollar, because they indicate that the kiwi economy is cooling. When an economy cools, businesses are more likely to keep prices the same.

Given this, New Zealand's inflation could stay below the Reserve Bank of New Zealand (RBNZ) 2.0% mid-range target for the foreseeable future. In turn, the RBNZ may keep interest rates low at 1.75% for longer.

Low interest rates make investing in New Zealand less profitable for global money managers, cutting demand for the NZ dollar, and thus lowering its value!

Pound Strengthens, as May Wins Key Brexit Vote in Parliament

Furthermore, the pound to New Zealand dollar interbank exchange rate has also hit this 3-week high, because UK prime minister Theresa May has won a vital Brexit vote in Parliament.

To be specific, on Wednesday MPs in the House of Commons voted by 319 to 303 for the UK government to retain control of the UK's Brexit negotiations with the European Union (EU), rather than Parliament vetoing the final deal.

This increases the odds that the UK government will quickly reach a satisfactory Brexit deal with the EU, rather than debating with MPs, thus boosting sterling!

Sterling Rises, as UK Industrial Output Jumps, Says CBI

In addition, the pound has also strengthened, because UK factory output strongly recovered this month, said closely-watched figures on Wednesday.

In particular, UK manufacturing reached +13 in June, according to the Confederation of British Industry's (CBI) monthly industrial trends survey. This is well above May's figure of +3, and so points to robust UK factory production.

Especially encouraging is that UK manufacturers said that export volumes remained well above their historical averages this month. This bodes very well for UK GDP growth in Q2, and so has lifted the pound!

With all this in mind, the pound has hit this 3-week high against the New Zealand dollar today, and could rise higher. Transfer your money while this excellent exchange rate remains available, to greatly lift your New Zealand dollar total!

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You’ll get an outstanding pound to New Zealand dollar exchange rate for your money transfer!

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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