New Zealand Dollar Rebounds Despite Rate Cut, GBP/NZD Hits 1-Month lows

November 28, 2024 - Written by Frank Davies

STORY LINK New Zealand Dollar Rebounds Despite Rate Cut, GBP/NZD Hits 1-Month lows

The New Zealand dollar rallied after the Reserve Bank of New Zealand (RBNZ) interest rate cut.

There had been some speculation of an even larger cut and the decision triggered some short covering. There were also hopes that lower rates would help support the economy.

The New Zealand dollar to dollar (NZD/USD) exchange rate rallied to 0.5875 from 0.5830 while the Pound to New Zealand dollar (GBP/NZD) exchange rate hit 1-month lows at 2.1380 before a recovery to 2.1420.

The RBNZ cut interest rates by 50 basis points to 4.25% at the policy meeting which was in line with consensus forecasts and the second successive 50-point move.

According to the statement, “Feedback from recent surveys and business visits suggest domestic price and wage setting behaviours are becoming consistent with inflation remaining sustainably at target.”

The bank warned that rates might have to be higher than expected over the medium term due to global developments, especially if there is a widespread imposition of tariffs.

According to Governor Orr, however, the bank is on course for a further 50 basis-point cut in February if the economy performs as expected and the bank expects further cuts next year. Orr considers that the neutral rate is in the 2.5-3.5% range

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TAGS: Pound New Zealand Dollar Forecasts