The New Zealand Dollar gained some ground against Sterling last week as the Pound continued to struggle in the global market. Both currencies saw rate cuts weigh heavily, with the 150 basis point cut to 5% in New Zealand mostly priced in in advance by the market, as was the case for Sterling.

The RBNZ announced that they expect the New Zealand economy to shrink by 0.2% in the first half of 2009. This is echoed by technical analysts, who also predict that the first two quarters will show a contraction in the economy. RBNZ Governor Alan Bollard also hinted that further rate cuts are likely, with futures markets now pricing in at least another 1.00% cut over the next 12 months. This reduction in base rate as well as continued risk aversion is likely to weigh on the New Zealand Dollar over the medium term.

This may suggest that Kiwi buyers would consider holding off on buying their currency, however given the current uncertainty surrounding Sterling, the direction and sentiment of the GBP/NZD cross is very difficult to predict. Therefore, it may be wiser to secure your currency on a Forward Contract for the future and fix an exchange rate.