The Pound New Zealand Dollar (GBP/NZD) exchange rate fell last week, briefly touching a three-week low, as the Bank of England (BoE) decision caused Sterling to tumble.
What’s Been Happening: GBP/NZD Declines amid UK Economic Concerns
GBP/NZD wavered lower through the first part of the week as a bullish mood lifted the more risk-sensitive New Zealand Dollar (NZD) over the Pound (GBP).
Thin trading conditions on the Early May Bank Holiday left Sterling open to losses, while a flat New Zealand unemployment rate limited NZD’s gains on Tuesday night.
The Pound then fell against the ‘Kiwi’ midweek. The UK announced further sanctions on Russia, which will likely have a knock-on impact on the UK economy. Meanwhile, NZD enjoyed a boost as the US Dollar (USD) slipped following the Federal Reserve interest rate decision.
Sterling then slumped after the BoE meeting. The UK central bank expects inflation to peak at over 10% in the autumn while also forecasting a possible recession. The Pound dropped across the board, but managed to bounce back against the ‘Kiwi’ amid a downbeat market mood.
The pair then traded flat on Friday. The BoE decision continued to weigh on Sterling while a bearish tone and falling commodities prices pressured NZD.
Three Things to Watch Out for This Week
- Risk Appetite
The market mood continues to be a defining factor for the GBP/NZD pair. With the Ukraine crisis, surging inflation and fears of a slowing global economy, the ‘Kiwi’ could struggle.
- UK GDP
Economists expect UK GDP to have stalled in March. If so, GBP exchange rates will likely slip.
- NZ Business PMI
NZD may enjoy a modest lift on Thursday evening as forecasters predict a rise in New Zealand’s latest business PMI.
Risk appetite could drive most of the movement over the coming week, along with commodities prices, as investors await the higher-impact data on Thursday. So far, GBP/NZD has recovered last week’s losses. But if the UK GDP report sets alarm bells ringing, the Pound could fall sharply.