The Pound New Zealand Dollar (GBP/NZD) exchange rate slumped last week, as some hawkish guidance from the Reserve Bank of New Zealand (RBNZ) offset some of the volatility stemming from the Ukraine crisis.
What’s Been Happening: New Zealand Dollar Firms on Hawkish RBNZ Rate Hike
The New Zealand Dollar climbed higher against the Pound last week, in spite of Russia’s invasion of Ukraine sparking considerable risk-off flows in the latter half of the session.
The uptick in the ‘Kiwi’ was underpinned by the RBNZ, as it struck a notably hawkish tone after it raised interest rates at its February policy meeting.
Meanwhile, the Pound initially got off to a strong start last week after the UK’s latest services PMI printed at an eight-month high in February.
However Sterling was unable to hold on to these gains for long, with GBP exchange rates coming under some notable pressure in the wake of some cautious comments from Bank of England (BoE) policymakers.
BoE Governor Andrew Bailey warned markets ‘not to get carried away’ with aggressive rate hike bets as he spoke to the Treasury Select Committee.
Bailey’s comments triggered a repricing of March rate hike expectations, which weighed on the Pound through the latter half of the week.
Three Things to Watch Out for This Week
- Ukraine Crisis
The crisis in Ukraine and the resulting sanctions imposed by Western powers on Russia could infuse additional volatility into the GBP/NZD exchange rate this week.
- BoE Speeches
Several speeches from BoE policymakers scheduled for this week will be the focus for GBP investors. A broadly dovish consensus could place additional pressure on Sterling.
- UK Politics
Also set to influence the Pound will be Boris Johnson’s handling of the Ukraine crisis. A strong response to Russian aggression could help to boost Johnson’s approval ratings and shore up the PM’s support against any future leadership challenge.
Pound New Zealand Dollar Forecast
Looking ahead, as the Ukraine crisis continues to dominate headlines could we see trade in the Pound New Zealand Dollar exchange rate remain erratic this week?