The Pound New Zealand Dollar (GBP/NZD) exchange rate is strengthening so far this week. UK manufacturing and services PMIs released this morning beat forecasts and remained in strong growth territory, lifting optimism in the UK’s economic recovery.
Meanwhile, a worse-than-expected contraction of -8.1% in third quarter retail sales for New Zealand has dented the ‘Kiwi’ ahead of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision.
What’s Been Happening: Pound Boosted by BoE Rate Hike Bets
After fluctuating through last week, the GBP/NZD exchange rate was up on last week’s opening levels at the close of Friday’s session.
Increasing expectations for the Bank of England (BoE) to raise interest rates at its upcoming policy meeting boosted the Pound following upbeat UK jobs data and inflation jumped to a decade high.
UK unemployment fell to 4.3% in the three months to September and company payrolls increased by 160,000 after the end of the furlough scheme, while inflation accelerated to 4.2% in October from 3.1% in September.
Meanwhile, the risk-sensitive New Zealand Dollar moved with shifting market risk appetite driven by upbeat trade triggered by better-than-expected Chinese data, before coming under pressure as market sentiment soured on surging Covid-19 cases in Europe.
Three Things to Watch Out for This Week
- RBNZ Interest Rate Decision
While many investors appear to have already priced in an expected rate hike from the RBNZ to 0.75% from 0.5%, any surprises with a more aggressive rate hike may offer the New Zealand Dollar additional support.
- Covid-19 Infections in Europe
Surging cases of Covid-19 sweeping Europe may continue causing swings in risk appetite, potentially driving movement in GBP/NZD.
- Bank of England Rate Hike Speculation
Comments from BoE Governor Andrew Bailey over the weekend cast some doubt on a rate hike in December, and further insight from policymakers this week may drive additional movement in the Pound.
GBP/NZD Exchange Rate Forecast
Central bank interest rate decisions and speculation look set to continue driving significant movement in the Pound New Zealand Dollar exchange rate, with investors anticipating how aggressively the RBNZ plans to hike rates.
Signs of UK economic recovery in manufacturing and services PMIs may provide the Pound with support through the first part of the week.