The Pound New Zealand Dollar (GBP/NZD) exchange rate fell to a four-month low last week amid some turbulent trade as the Russia-Ukraine war infused the currency pair with volatility.
This week, GBP/NZD has regained last week’s losses. China is implementing wide-ranging lockdowns to contain a Covid outbreak. This in turn is weighing on the China-proxy New Zealand Dollar (NZD).
What’s Been Happening: GBP/NZD Slumps as Peace Talks End in Deadlock
The New Zealand Dollar jumped higher against the Pound (GBP) as last week’s trade began, hitting a four-month high, as rising materials prices boosted the commodity-linked ‘Kiwi’.
However, NZD then began slipping lower as the commodity-fuelled rally faded.
Thursday saw the New Zealand Dollar surge to a fresh four-month high as Sterling slumped, despite softer commodities prices limiting NZD’s gains.
Meanwhile, the Pound began recovering from its initial drop early last week. Successful civilian evacuations in Ukraine and planned peace talks between the Russian and Ukrainian foreign ministers lifted investors’ spirits.
However, the negotiations ended without a ceasefire agreement and with both diplomats sounding downbeat. As a result, Sterling tumbled to a new four-month low.
On Friday, GBP/NZD regained some lost ground after UK GDP beat forecasts to rise by 0.8% in January.
Three Things to Watch Out for This Week
- Risk Appetite
Both GBP and NZD are risk-sensitive currencies but could be affected by different events. The Russia-Ukraine war will have a bigger impact on the Pound while China’s Covid outbreak could hurt the ‘Kiwi’.
- NZ GDP Growth Rate
Forecasters expect the New Zealand economy to have recovered in the fourth quarter of 2021, which could give NZD a boost.
- BoE Interest Rate Decision
The Bank of England (BoE) is likely to enact its third back-to-back rate hike at its meeting on Thursday, potentially supporting the Pound.
GBP/NZD Forecast
Markets could remain volatile this week, with the Russia-Ukraine war, China’s new lockdowns and some high-impact economic events all increasing the uncertainty. Therefore, we could see GBP/NZD trade in a wide range once again.