Pound New Zealand Dollar Exchange Rate Weekly Forecast: GBP/NZD Hits Six-Week High amid Surging UK CPI Reading

The Pound New Zealand Dollar (GBP/NZD) exchange rate wavered throughout last week’s session before soaring to a six-week high on the UK’s hot CPI reading.

What’s Been Happening: GBP/NZD Surges Higher as UK Inflation Skyrockets

The GBP/NZD exchange rate trended slightly higher at the beginning of last week’s session in spite of a lower-than-forecast UK GDP reading, with the UK economy slowing to 0.1% in February.

However, a 0.09% increase in UK government bond yields provided Sterling with some support.

Meanwhile, the New Zealand Dollar (NZD) lost ground as credit card spending contracted by 1.3% instead of rising as forecast.

On Tuesday, mixed UK employment data left the Pound (GBP) directionless: the UK unemployment rate fell from 3.9% to 3.8%, but high inflation weighed on real income in the UK.

At the same time, the Reserve Bank of New Zealand (RBNZ) hiked interest rates by 50 basis points instead of the predicted 25 bps, raising interest rates to 1.5%. The ‘Kiwi’ initially jumped but then began to plummet.

The UK CPI for March jumped from 6.2% to 7%. This further boosted GBP/NZD by increasing Bank of England (BoE) rate hike bets, and the currency pair hit a six-week high.

At the end of the week, an unexpected rise in New Zealand’s business PMI prevented further gains for GBP/NZD.

Three Things to Watch Out for This Week

  1. Russia-Ukraine War

Should Russia’s invasion of Ukraine continue to escalate, it may drive additional volatility for GBP exchange rates.

  1. New Zealand Inflation

If New Zealand’s inflation reading for the first quarter prints in line with market forecasts of 2%, it may bolster RBNZ rate hike bets and improve demand for the ‘Kiwi’.

  1. BoE Speeches

If speeches from the BoE Governor, Andrew Bailey, and policymakers Anna Sweeney and Catherine Mann reiterate the BoE’s dovish stance, it may hinder Sterling.

Pound New Zealand Dollar Forecast

With geopolitical tensions building, as well as New Zealand’s latest inflation reading and a number of BoE speeches, GBP/NZD may be strained in the near-term.

Bethany Uren

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