Pound New Zealand Dollar Weekly Forecast: GBP/NZD Stable near 16-Month High

The Pound New Zealand Dollar (GBP/NZD) exchange rate continues to hold near 16-month highs at the start of this week.

A mixed UK jobs report released on Tuesday morning that revealed unemployment dropped to 4.1% in November but that wage growth fell behind inflation has limited Sterling.

What’s Been Happening: Pound Rebounds on UK Economic Optimism

The Pound (GBP) fluctuated last week before firming at the end of the session as UK economic recovery optimism bolstered GBP exchange rates.

Signs that the UK is on the road ‘from pandemic to endemic’ according to a UK government minister, and UK GDP growth figures for November showing the UK economy has risen above pre-pandemic levels bolstered the Pound.

Meanwhile, the New Zealand Dollar (NZD) experienced some volatility last week on shifting market risk appetite.

NZD exchange rates jumped in midweek trade after the Federal Reserve cooled some investor concerns over quantitative tightening and US inflation failed to rise as high as some feared, triggering risk-on trade and boosting the risk-sensitive ‘Kiwi’.

However, souring market sentiment on Friday dented NZD sentiment again.

Three Things to Watch Out for This Week

  1. UK Inflation Rate

Forecasts point to the UK consumer price index having ticked higher to 5.2% in December, potentially increasing the likelihood of the Bank of England (BoE) raising interest rates and in turn support Sterling.

  1. Market Risk Appetite

With concerns over the global growth outlook, high worldwide Covid-19 case rates, and worries over the impact of aggressive monetary policy tightening from the Fed on emerging markets, the New Zealand Dollar could come under pressure from downbeat market mood.

  1. UK Retail Sales

The Pound could struggle at the end of the week as December’s UK retail sales are expected to have contracted -0.6% amid Omicron variant concerns, which may lead to weaker UK growth at the end of the year.

Pound New Zealand Dollar Forecast

The Pound New Zealand Dollar exchange rate looks to consolidate its gains above a key level again this week.

An increasingly likely rate hike from the BoE in February, falling UK Covid-19 cases, and speculation the government will lift restrictions could help GBP to firm.

Meanwhile, the New Zealand Dollar could remain under pressure if concerns over global growth and Fed monetary tightening continue to cause market jitters.

Andrew Roberts

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