The Pound has been unsettled lately by contrasting views from Bank of England (BoE) officials. In the future, Sterling has a chance of rallying against the New Zealand Dollar if the BoE votes to raise interest rates, which would be the first time in over a decade.
GBP Prediction: Will BoE Majority Bring Pound-Boosting Interest Rate Hike?
One of the hot topics in the UK economy in recent months has been when the BoE will raise interest rates.
The interest rate was cut from 0.50% to 0.25% in the aftermath of the EU Referendum. Since then, UK consumers have faced a depletion of real incomes due to higher inflation and slower wage growth.
Although the UK economy is still on thin ice due to Brexit uncertainty, some BoE policymakers have stated that a UK rate hike may be needed to counteract rising inflation, which was up to 2.9% in May.
The BoE is in a difficult position, however, as with interest rates currently at their lowest level in history, borrowing has been on the rise. By raising interest rates, inflation could fall but those who were just getting by on low repayment rates could suddenly struggle to cope.
On the BoE’s Monetary Policy Committee (MPC), those voting for an interest rate hike in 2017 could include Ian McCafferty, Andy Haldane and Michael Saunders. There is some degree of uncertainty about other officials, but crucially the MPC only has eight members at present instead of the usual nine.
This means that there is a lower threshold to pass for a rate hike to take place, which could prove crucial for the remaining interest rate decisions in 2017.
If UK interest rates are raised even once, the Pound could rally strongly against the New Zealand Dollar in 2017.
New Zealand Dollar Outlook: Dairy Prices Remain Deciding Factor for NZD
Sticking with more familiar territory, the New Zealand Dollar could be moved in the future by any signs of rising dairy prices.
Dairy exports remain a key factor in continued NZ economic growth and for context, the latest figures have shown a slight decline in late June and early July.
If dairy prices go through a sustained period of growth, the New Zealand Dollar may be able to advance on greater optimism about a key national sector.
Recent Interbank GBP NZD Exchange Rates
At the time of writing, the Pound to New Zealand Dollar (GBP NZD) exchange rate was trading at 1.7628 and the New Zealand Dollar to Pound (NZD GBP) exchange rate was trading at 0.5671.