Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: Exchange Rate Slumps amid Cost-of-Living Crisis

The Pound New Zealand Dollar (GBP/NZD) exchange rate wavered before hitting a two-week low in a turbulent week that saw UK political and economic concerns dominate.

What’s Been Happening: Pound Falters on UK Uncertainty

The Pound started the week on the back foot as poor PMI data further highlighted the impact of the cost-of-living crisis. The services index dropped to 51.8 in May, ever-inching towards stagnation, down from 58.9 in April.

Further piling the pressure on Sterling in midweek trade was the release of the highly anticipated Sue Grey report and her investigation of ‘partygate’. The ensuing political uncertainty weighed on the Pound as Boris Johnson’s leadership was called into question.

Elsewhere, the New Zealand Dollar soared as the Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) from 1.5% to 2%, while signalling plans to continue the current pace of hikes.

Towards the end of the week, the Pound weakened despite fiscal support measures outlined by Rishi Sanuk, as concerns of inflationary pressures continued to grow.


Three Things to Watch Out for This Week

  1. Chinese Reopening

With lockdowns easing across China, and Shanghai still on track to reopen by 1st June, a modest market recovery could further boost the New Zealand Dollar.

  1. UK Politics

The fallout of the Sue Grey report continues, with many calling for Boris Johnson’s resignation, including a growing number in his own party. The ongoing political volatility, compounded by Brexit fears, may weigh heavily on the Pound.

  1. Policy Divergence

Without major data due out for the Pound, and a shortened week, market movements could be dictated by the divergence in policies of the central banks. With the RBNZ continuing its hawkish stance, the Bank of England look to be in a state of limbo, with no clear direction going forward.

Pound New Zealand Dollar Forecast

Looking ahead, the Pound New Zealand Dollar exchange rate could be left to trade on market sentiment as data remains thin on the ground as the Jubilee weekend cuts the trading week short.

Danny Tingle

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