A quiet week for data left the Kiwi relatively unchanged against a basket of major currencies and with the RBNZ looking like they will leave rates unchanged for the time being, we mainly saw sideways trading between the Kiwi and the Pound.

The only key release last week was the government announcing the country’s annual budget and with that, larger than expected tax cuts. Finance minister Cullen announced NZD 8.2 billion tax reductions from October which should help the slowing economy and signals that interest rates are likely to remain on hold for now.

With rates looking to stay on hold for now we should see Kiwi gaining some support as a key currency used in carry trades (rates are currently at 8.25%) but with the current global economic slowdown the Kiwi will have to draw continuous support from carry trades as any decline in global risk appetite or an unwinding of carry trades would see more volatility in the NZD and a possible sell of against the Pound. However, for now we expect rates to remain range bound between 2.45 and 2.55 as interest rates look to remain on hold in both countries in the near future with looks to possible cuts from both the BoE and RBNZ towards the end of the year.