Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rate forecast to fall as RBZ expected to raise interest rates

Pound to New Zealand Dollar exchange rate chart

The New Zealand Dollar was weaker against most major peers on Monday as disappointing data out of China and Japan weighed upon risk sentiment. The currency is also forecast to fall over the coming days as speculation rises that the Reserve Bank of New Zealand will hike interest rates on Thursday.

The ‘Kiwi’ tumbled along with its Australian relation after economic data out of the world’s second largest economy showed that Chinese exports plummeted by 18% from the previous year, a far worse figure than the expected 6.8% rise forecast by economists. Imports increased by 10.1% giving the nation a trade deficit of $23 billion, down from the $32 billion surplus recorded in January. The data worried economists as it suggests that the Chinese economy could be slowing down.

A separate report also showed that the annual rate of inflation in China fell from January’s 2.5% to 2.0%.

Japanese data also dented demand for riskier assets as a current account report showed that the nation posted a deficit of 1.589 trillion Yen. Fourth quarter GDP figures also disappointed, GDP expanded by 0.2%, below the expected figure of 0.3%.

Speculation that New Zealand’s Central Bank will hike interest rates is also having an effect on the South Pacific currency. The booming house market, a result of the rebuilding of Christchurch in the wake of an earthquake in 2011 has seen house prices soar and inflation rise.

Economists are expecting RBNZ Governor Graeme Wheeler to hike interest rates by as much as 25 basis points on Thursday.