Pound New Zealand Dollar Forecast: GBP/NZD Steady ahead of BoE Rate Decision

The Pound New Zealand Dollar (GBP/NZD) exchange rate has edged slightly higher so far this week towards levels from a week ago after slipping in last week’s session.

Following tighter UK restrictions and Omicron-induced volatility last week, a slew of high-impact data releases, the Bank of England (BoE) interest rate decision, and concerns of even tighter UK restrictions look set to drive movement in GBP/NZD.

What’s Been Happening: Pound Slips as UK Government Tightens Restrictions

The Pound trended lower through the first part of last week after the UK government announced tighter Covid-19 restrictions, and growing concerns over the Omicron variant further weakened expectations for a rate hike from the BoE.

GBP/NZD was able to recover ground at the end of the week but Sterling’s upside was limited by UK GDP growth stalling in October at 0.1%, below forecasts of 0.4%.

Meanwhile, the risk-sensitive New Zealand Dollar ticked higher early in last week’s session amid risk-on trade, which received another boost after Pfizer/BioNTech claimed their vaccine provides a high level of protection against the Omicron variant.

NZD exchange rates weakened at the end of the week as market mood soured and the Business NZ PMI came in well below forecast at 50.6 to indicate manufacturing activity slowed to near stagnation in November.

Three Things to Watch Out for This Week

  1. Bank of England Interest Rate Decision

Expectations for a rate hike from the BoE have weakened recently amid the emergence of the Omicron variant and tighter UK restrictions. But any indications on the central bank’s forward guidance on tighter monetary policy next year will likely trigger movement in GBP.

  1. UK Inflation Rate

Forecasts point to inflation having risen to 4.7% in November, potentially increasing pressure on the BoE to alter policy stance, which in turn could cause the Pound to slip.

  1. Omicron Developments

With the threat of tighter restrictions in the UK looming and New Zealand set to postpone opening its borders due to the Omicron variant, further disruption to economic activity will likely drive volatility in GBP/NZD.

Pound New Zealand Dollar Forecast

The Pound New Zealand Dollar exchange rate looks set to experience more Omicron-driven volatility this week, with central bank interest rate decisions from the Fed and European Central Bank (ECB) alongside the BoE likely to cause global market movement.

Andrew Roberts

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