Pound New Zealand Dollar Weekly Forecast: GBP/NZD Surges as Omicron Variant Rocks Markets

The Pound New Zealand Dollar (GBP/NZD) exchange rate is surging today and building on last week’s significant gains.

News of the highly-mutated Omicron coronavirus variant has rocked markets, while the Reserve Bank of New Zealand’s (RBNZ) rate decision last week disappointed investors, pushing GBP/NZD higher.

What’s Been Happening: Omicron Variant Fears and RBNZ Decision Hit NZD

The Pound has moved sharply higher over the last week against risk-sensitive currencies such as the New Zealand Dollar as the emergence of the Omicron coronavirus variant triggered flight to safe-haven assets.

Better-than-expected UK manufacturing and services PMIs provided Sterling support earlier in the week, although a lack of progress in UK-EU talks on the Northern Ireland protocol caused GBP headwinds.

Meanwhile, the New Zealand Dollar plummeted last week following the RBNZ’s decision to raise interest rates to 0.75% from 0.5%.

Some investors had anticipated a more aggressive hike, as well as a faster tightening cycle of monetary policy than New Zealand’s central bank signalled. The RBNZ revised forecasts to signal rates will reach 2.5% by 2023.

The risk-sensitive ‘Kiwi’ fell further at the end of the week as reports of the Omicron variant soured market sentiment.

Three Things to Watch Out for This Week

  1. Omicron Coronavirus Developments

After the chief executive of drugmaker Moderna warned the efficacy of existing vaccines may be lower against the Omicron variant, further headlines and developments will likely continue driving significant market volatility.

  1. Bank of England Rate Hike Speculation

More insight from Bank of England (BoE) policymakers, and the emergence of the Omicron variant will fuel speculation over an interest rate hike as the central bank’s December policy meeting draws nearer.

  1. UK-EU Tensions

With talks over the Northern Ireland protocol appearing to remain at an impasse, rising Anglo-French tensions over fishing and channel crossings could put Sterling under additional pressure.

GBP/NZD Exchange Rate Forecast

Reports emerging about the Omicron coronavirus variant look set to dominate movement in the Pound New Zealand Dollar exchange rate this week.

While fears that the new variant could disrupt global economic activity, which in turn sour market mood and weighs on NZD, the concerns could lead to speculation that the BoE may delay hiking interest rates at its December policy meeting.

Andrew Roberts

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