Pound Sterling Australian Dollar (AUD) and New Zealand Dollar (NZD) Forecasts Shift Notably to the Downside

July 7, 2016 - Written by Minesh Chaudhari

STORY LINK Pound Sterling Australian Dollar (AUD) and New Zealand Dollar (NZD) Forecasts Shift Notably to the Downside

Sterling has failed to make much of a recovery against the Australian and New Zealand Dollars today, though gains have been recorded against most of the Pound's other peers.

The Pound has dropped off against the 'Kiwi' and weakened against the Australian Dollar, on account of recent events such as fund suspensions causing great alarm among GBP investors.

RBA Voted to Maintain Key Interest Rate

The Reserve Bank of Australia (RBA) decided, as anticipated by the majority of analysts, to maintain its key interest rate at its current record low of 1.75% at this week’s policy meeting. The news sent the Pound Australian Dollar exchange rate plunging down into the low-1.7000s. The pair had been changing hands at above the two to one threshold as recently as the final week of May, but the subsequent re-rating of the Pound following the UK electorate’s decision to leave the European Union, has now been accentuated by the decision by Australian policymakers to sit on their hands.

RBA Governor Glen Stevens explained in his statement which accompanied the announcement, the reasons behind the decision. Taking stock of Britain’s vote for Brexit, the notes observed that,

‘Financial markets have been volatile recently as investors have re-priced assets after the UK referendum. But most markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative. Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern.’

This go-ahead message, accentuating the continuing ultra loose monetary policy stance from the world’s central banks, helped to settle investors. Meanwhile, Steven’s observation that Australian, ‘dwelling prices have risen again in many parts of the country over recent months,’ was taken as a hint by investors that there is little headroom for further Aussie rate cuts during coming months.

Falling Whole Milk Powder Prices Weighed Heavily on NZD Exchange Rates

The early part of this week’s trading session brought significant events from the Southern hemisphere, with an interest rate decision in Australia and the latest GlobalDairyTradeAuction results proving to be market-moving for the New Zealand Dollar (currency : NZD).

The New Zealand Dollar has also gained substantial ground against the Pound since the UK referendum.

However, analysts forecast that this drop for the GBP NZD exchange rate could be halted by this week’s GlobalDairyTrade auction results which revealed another drop in the fetching price for NZ’s number one export - Whole Milk Powder (WMP).

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TAGS: Australian Dollar Forecasts New Zealand Dollar Forecasts Pound Austr Forecasts