Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: Exchange Rate Trades on UK Data

The Pound New Zealand Dollar (GBP/NZD) exchange rate peaked early in the week on an upbeat UK jobs report, before slumping as UK inflation hit a fresh high. Meanwhile, the New Zealand Dollar (NZD) traded on risk flows and trade data.

What’s Been Happening: UK Jobs Data Buoys Pound, CPI Reverses Gains

The Pound (GBP) slumped against the New Zealand Dollar at the beginning of the week, subdued by mounting Brexit fears and growing inflationary pressures.

As politicians failed to come to an agreement over the Northern Ireland protocol, Ireland’s Foreign Minister warned Boris Johnson against making unilateral changes.

Sterling then recouped its losses and peaked against the ‘Kiwi’ on better-than-expected jobs data; meanwhile, the ‘Kiwi’ made small gains on Australian Dollar (AUD) upside but lacked any domestic trading stimuli.

Midweek, GBP/NZD fell as UK inflation hit 9% in April, exacerbating fears of a recession. Tepid risk sentiment capped NZD gains, however, while New Zealand’s largest export, dairy, trended lower in value.

At the end of the week, Sterling was supported by better-than-expected data from the Confederation of British Industry (CBI) and impressive retail sales.

Nevertheless, the New Zealand Dollar enjoyed upside against GBP as New Zealand’s trade balance revealed a surplus rather than the NZ$-410 deficit expected.

Three Things to Watch Out for This Week

  1. RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) is expected to hike interest rates by 0.5% tomorrow, potentially buoying the ‘Kiwi’.

  1. UK Politics

Compounding today’s downbeat PMI release, fresh scrutiny of the ‘Partygate’ scandal could subdue Sterling sentiment.

  1. Geopolitical Tensions

In addition to domestic politics, international relations may continue to weigh upon risk sentiment. As the war in Ukraine rages on, hostility between Russia and the West increases.

Pound New Zealand Dollar Forecast

Alongside ‘Partygate’, Brexit tensions are in the spotlight as well as the UK’s cost-of-living crisis, with cabinet ministers frustrated at a delay in implementing support measures.

An economic rescue package was originally penciled in for Wednesday, but government sources have since confirmed it is unlikely to be announced this week.

Olivia Evershed

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