Despite a relatively quiet week for New Zealand markets, the Kiwi dollar has failed to find reprieve from the downward pressure it has experienced over the last fortnight. With this in mind, one NZD will buy you:
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There was some stronger than expected data coming out of the United States this week, with the US Producer Price Index coming in at 0.6% compared to the 0.3% market estimate. New US jobless claims also fell to 50-year lows.
Markets are expecting a US interest rate cut of 15 basis points by December 2019, and 45 basis points by December 2020. The patient and steady outlook provided by the Federal Reserve Bank in the last few months will probably need to change in order for the value of the US dollar to move significantly either way.
In some ways, both the RBA and the US Federal Reserve Bank are exhibiting the same “wait and see” type of approach to similar issues; seemingly strong employment data but slowing growth.
If USD interest rates are decreased, it could lead to upward pressure on the value of the NZD, which is good news for Kiwi travellers.
IMF global forecasts
Significant news released during the week was that the International Monetary Fund (IMF) downgraded its 2019 global Gross Domestic Product forecast to 3.3% from 3.5%.
The IMF reiterated that global risks to the downside remain, and that the world economy was at a delicate juncture. 2019 growth outlooks were revised lower in Australia, the US, the EU and the UK.
New Zealand is expected to have higher growth rates than other countries in the Organisation for Economic Cooperation and Development (OECD). The NZ economy has strong foundations of relatively low debt, low unemployment and surpluses in the 2018 budget. Despite this, however, the slowing of other economies will have an effect on New Zealand due to its nature as a small trading nation.
This announcement did not have any major impact on the value of the NZD, however it is something to keep an eye on over time.
Brexit has been delayed… again
After being delayed from the 29th of March to the 12th of April (today), this week the European Union granted the UK a further extension for Brexit until the 31st of October.
This extension was provided in the hope that the UK parliament can somehow resolve their current political deadlock to reach a consensus on how to leave the EU. Many argue that the UK has already had over two years; what is another few months going to do? Either way, it will prove for a spooky Halloween surprise if they manage to get everything sorted in time.
Regardless, the extension has stopped the UK crashing out of the EU with a no deal, which has allowed global markets a sigh of relief. Whilst a no deal would potentially push the pound down in value against many currencies (including the AUD) and provide a welcome travel money bonus for Kiwi travellers to the UK, the long term effects on the global economy would be far less favourable.
Looking ahead, the events of the next five months are likely to be much of the same as what are now used to; arguing MPs, meetings between political parties, calls for another referendum as well as a change of leadership. If the UK doesn’t reach an agreement soon, it is also highly likely they will need to take part in the EU elections, which is a pretty touchy subject for many Brits who thought they would have been rid of the EU by now.
Despite the new extension, we still have no real clarity as to what Brexit will mean for the UK. If you are planning on travelling there soon, it is definitely worth wising up on how Brexit may affect your trip. Don’t forget to add Rate Guard to your purchase in store as well. If the exchange rate improves within 14 days of purchase, we will refund you the difference*!
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