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Pound to New Zealand Dollars Rate Hits Over 6-Month High

Market CommentaryPound to New Zealand Dollars Rate Hits Over 6-Month High
Pound to New Zealand Dollars Rate Hits Over 6-Month High
Pound to New Zealand Dollars.

There's potentially helpful news for you, if you're a Brit planning to transfer money to New Zealand, to emigrate, buy a property, or for your business.

The pound to New Zealand dollars interbank exchange rate has hit its highest in over 6 months today, or since October 24th last year, at 1.9710.

By comparison, on December 12th 2018, sterling was as weak as 1.8137 versus the kiwi dollar. So it's since strengthened by +8.67%, or over +15 cents.

To put this into context for you, £250,000 at today's interbank exchange rate would be worth NZ$492,750. This is +NZ$39,235 more than on December 12th!

So when you transfer money to New Zealand, you could potentially now get a notably higher kiwi dollar total, compared to late last year.

An big factor why the pound to New Zealand dollars rate has hit this 6-month high, is because New Zealand's economy has slowed, says the latest economic data.

Let's take a closer look at the factors that have affected the value of sterling versus the kiwi dollar, which you might find useful for your money transfer.

New Zealand Job Market Data Disappoints in Q1

The first factor why the pound to New Zealand dollar interbank exchange rate has hit this 6-month high is because New Zealand's job market data for Q1 2019 has disappointed the financial markets, reports newspaper The NZ Herald.

In particular, according to Statistics New Zealand on Wednesday, New Zealand's employment change fell by -0.2% between January and March this year. This is beneath both Q4 2018's +0.1% growth, and economists' predictions for a +0.5% expansion.

In addition, New Zealand's labour force participation rate fell by -0.5% in the first 3 months of this year, to 70.4%. This tells us that more New Zealanders left the job market in early 2019, and was also below financial markets' forecast.

According to Statistics New Zealand, "New Zealand has seen a softening of economic growth as measured by gross domestic product over the last 6 months, and we now are seeing that softening come through the employment rate."

When New Zealand's job market softens, fewer New Zealanders have jobs to buy goods and services. In turn, this could slow New Zealand's economic growth rate in the coming months, so this has contributed to weaken the New Zealand dollar.

Reserve Bank of New Zealand Forecast to Cut Interest Rates

In addition, a further factor why sterling has reached this 6-month high versus the kiwi dollar is because New Zealand's central bank, the Reserve Bank of New Zealand (RBNZ) is being heavily tipped to cut interest rates next week, according to Forexlive.

In particular, it's thought that the RBNZ might slash interest rates by -0.25%, to 1.5%, because New Zealand's economy has showed signs of slowing. This week's disappointing jobs market data adds to this case.

According to money markets, following New Zealand's downbeat labour force statistics, there's now a 60% chance that the Reserve Bank will cut interest rates next week. This is up from 40% before the jobs market data for Q1 was published.

As recently as March, New Zealand's central bank signalled that it might soon cut interest rates. The RBNZ cited the "weaker global economic outlook and reduced momentum in domestic spending".

When the RBNZ cuts interest rates, this makes borrowing money in New Zealand cheaper. In turn, this encourages consumers and businesses to take out loans, thus supporting the economy. However, lower interest rates also making investing in New Zealand less profitable, which has contributed to drag down the kiwi dollar.

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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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