15th March 2019
The major events affecting currency markets this week revolved around the neverending story that is Brexit. Aside from that, our Kiwi Dollar has bumbled along with no major news able to push it out of a fairly narrow trading range. As it stands, one NZD will buy you:
0.6708 US dollars
0.4987 Great British pound
0.8829 Canadian dollars
0.9428 Australian dollars
0.8907 Singapore dollars
The NZD/USD cross has remained in a relatively tight trading range this week. The US inflation data came in slightly weaker which supported the value of the NZD (slightly less confidence in the US economy put upward pressure on the Kiwi Dollar).
US core consumer price index (CPI) inflation (excluding food & energy) missed expectations in February. Core inflation reduced to an annual pace of 2.1% (consensus was 2.2%), this was down from 2.2% the previous month. Core inflation has been trending down since July 2018’s reading of 2.4%.
In addition to this, there is a 34% chance of an interest rate cut by January 2020 in the US. This is a very different outlook to last year when the US Federal Open Market Committee (FOMC or Fed) were trying to give the market the impression that rates were going to be higher in 2019.
What does all of this mean for the Kiwi Dollar?
Inflation informs interest rates, and interest rates have a major effect on the value of countries currency. Should the Fed cut US interest rates, this will put downward pressure on the value of the USD and, in turn, upward pressure on the value of the NZD. Investors will move their funds to a country that provides a greater return. More investment = more demand = higher value of the currency.
In other news out of the US, their trade negotiations with China are continuing, however, there is nothing of real note occurring that we haven’t mentioned before. Trump doesn’t seem in any rush to sign a deal, nor do the Chinese. There’s plenty of optimism one day and then none the next. It’s still highly likely that both countries will reach a deal, it just might be slightly more delayed than originally hoped.
One currency that has not been particularly steady this week against the NZD was the Great British pound. You could compare its movements to one of those spew inducing rides that throw you up and down rapidly, without any real consideration for the riders enjoyment.
Whilst we can’t reduce that sick feeling you get after said ride, we can give you some peace of mind with currency movements. Simply add Rate Guard to your purchase in store. If the exchange rate shoots up within 14 days of purchase we will refund you the difference*. The best bit? It’s free!
So what exactly happened with Brexit to cause such rapid changes in the exchange rate? Look, if we are being honest it was a lot of meetings that resulted in British MP’s, and the rest of the world, still having no idea what is going on with Brexit. We’ve tried to summarise it as much as possible below:
Keep in mind that the votes happened in UK time which is overnight for Kiwis. The fall in value we saw on the 14th (Thursday) would have left you taking £14.40 less pounds when exchanging $2000NZD, compared to the Monday.
After three days of votes, we are only slightly closer to knowing what is happening with Brexit. Thankfully a no-deal has been ruled out. This is not only good for the UK but also New Zealand, as we would have felt the negative flow-on effects. Whilst the UK has agreed to extend Brexit, they still need to get all other 27 nations in the European Union to unanimously approve it.
Long story short: there were three votes where lawmakers decided to rule out a no deal and extend a process that has been going for 2 weeks. So, much of the same really.
If you’re heading to the UK soon, we recommend checking out our article on how Brexit may affect your travels. It seems like it won’t be going away any time soon.
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All rates are quoted from the Travel Money NZ website, and are valid as of 15 March 2019.
*Terms and conditions apply to Rate Guard. See https://www.travelmoney.co.nz/rate-guard for more information.