RBNZ Cut: Pound to New Zealand Dollar Nears Best Buy Rate in Nine Years

April 9, 2025 - Written by Frank Davies

STORY LINK RBNZ Cut: Pound to New Zealand Dollar Nears Best Buy Rate in Nine Years

The Reserve Bank of New Zealand (RBNZ) cut interest rates again as expected. The move was overshadowed by a further escalation in the US-China trade war which increased fears over the Asian and global economic outlook while risk appetite deteriorated again with equities under renewed pressure.

The New Zealand dollar to dollar (NZD/USD) exchange rate slumped to 5-year lows below 0.5500 before rallying to 0.5560 as the US currency came under pressure.

The Pound to New Zealand dollar (GBP/NZD) exchange rate surged to near 2.3300 and close to 9-year highs before a retreat to 2.3050.

Trade developments are likely to continue to dominate in the short term.

The RBNZ cut interest rates by 25 basis points to 3.50%, in line with consensus forecasts, although there had been some speculation that the bank would opt for a larger move.

This was the fifth successive move from the central bank.

According to the RBNZ; "The recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation in New Zealand."


It added; “As the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate.”

Barclays commented; “The statement was more dovish than expected.”

Markets are pricing in around a 95% chance of a cut in May and expect rates to decline to at least 2.75% by year-end.

The US has imposed tariffs of 10% on New Zealand exports to the US, but will not face the additional tariffs on many Asian economies which came in on April 9th.

There will be on-going concerns over the threat from a global slowdown.

Barclays commented; “NZD is vulnerable to a global growth slowdown, being a key exporter of agricultural products such as meat.”

There will be further concerns that damage to the Chinese economy will have an important negative impact on the regional economy.


According to ING; “The FX implications are very much secondary compared to the direction of trade news. AUD and NZD remain key laggards in G10 due to their proxy role for China.”

It added; “The People's Bank of China's (PBoC's) greater appetite for a lower yuan (more on the CNY section below) could take some pressure off the proxies, but it is not enough to trigger any strong rebound.”

Capital Economics also considered that the RBNZ statement was rather dovish.

It added; "We think the Bank will ultimately loosen policy settings to a greater degree than most are currently predicting."

ASB chief economist Nick Tuffley expects the central bank will have to cut rates further to a stimulatory level and now forecasts that rates will decline to 2.75% from the previous forecast of 3.25%.

He added; "If the tariff war gets dialled back in tempo to more of a skirmish, then the RBNZ may not need to cut the OCR to a sub-neutral rate. But it appears that would take a lot of negotiation or position reversal.”

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TAGS: Pound New Zealand Dollar Forecasts