Foreign Currency Exchange

The Kiwi dollar has benefited, along with most major world currencies, against a drastically weakened sterling. Last week saw an unexpected movement in the GBP NZD cross as although New Zealand is entering a period of apparent economic down turn and could be expected to weaken against the pound; the pending British recession is dominating the cross.

All eyes will be watching the central banks this month as possible rate cuts will have dramatic effects on the markets. Although we believe the Bank of England would like to be able to cut rates to help the flat growth in the UK, high inflation will probably still prevent them from doing so. The RBNZ however are highly expected to announce a 25 basis point rate cut on 11th September. We are therefore expecting a move back towards the low 2.6 dollars per pound from the current mid 2.5’s but still believe dampened UK sentiment will prevent moves towards the 2.7’s as some traders expected earlier in the year.