The Pound New Zealand Dollar (GBP/NZD) exchange rate wavered over the course of last week, directed predominantly by UK stimuli given a lack of NZ data. Australian Dollar (AUD) dynamics may have inspired some movement in the New Zealand Dollar (NZD), alongside data releases from China.
What’s Been Happening: Sterling Buoyed by Queens Speech
The Pound (GBP) firmed at the beginning of the week, as fears that Russia would escalate conflict in Ukraine proved needless. Meanwhile, a risk-off mood and weaker-than-expected AU consumer confidence subdued NZD, on account of its close correlation with the ‘Aussie’.
Subsequently, the Queen’s Speech pledged support for the Bank of England (BoE), lending Sterling further support – although tailwinds were capped midweek by a resumption of Brexit tensions.
GBP/NZD then fell as Chinese inflation climbed to 2.1% for the month of April, boosting China’s Antipodean trading partners; nevertheless, GBP resumed upside in the second half of the week despite poor GDP data.
On Thursday evening, a weaker-than-expected business PMI from New Zealand capped gains for the ‘Kiwi’, but the New Zealand Dollar gained at the end of the week, as fears of a recession limited GBP support.
Three Things to Watch Out for This Week
- UK Inflation
Inflation in the UK looks to have risen to 9.1% in April, on an annualised basis. This may inspire downside as the BoE grapples with fears of a recession.
- NZ Trade Balance
New Zealand’s trade deficit is expected to have grown in April 2022, to NZ$410m. This could weigh on the ‘Kiwi’ during Friday’s Asian session.
- UK Retail Data
UK retail sales look to have shrunk last month, albeit by a smaller fraction than the month previous. This could exert some GBP downside.
Pound New Zealand Dollar Forecast
Aside from economic data releases, risk sentiment is also likely to affect the Pound New Zealand Dollar exchange rate this week.
If tensions in Ukraine escalate significantly, widespread risk aversion could boost GBP/NZD on account of NZD’s greater risk sensitivity.