Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: Exchange Rate Drops as Johnson Survives Confidence Vote

The Pound New Zealand Dollar (GBP/NZD) exchange rate traded in a mixed range last week, peaking at a three-week high on Thursday before tumbling on UK cost-of-living concerns.

What’s Been Happening: Risk-Off Headwinds Cap Gains

At the beginning of the week, downside in the Australian Dollar (AUD) dented the New Zealand Dollar (NZD) alongside tensions between China and Australia – both large trading partners with NZ.

Meanwhile, the Pound (GBP) enjoyed upside ahead of a confidence vote in Prime Minister Boris Johnson. Markets anticipated that a vote of confidence would restore trust in the government, diverting attention from the ‘Partygate’ scandal.

Following the vote, Johnson continued to face criticism, however, with members of his own party saying he ought to resign given the margin by which he won. 41% of voters signalled a lack of confidence in the Prime Minister.

Sterling subsequently dipped, with downside compounded by a weaker-than-expected report from the British Retail Consortium (BRC). The New Zealand Dollar faced further pressure on risk-off trading and falling commodity prices.

Sterling was buoyed on Thursday as Boris Johnson addressed the heavy burden of taxation in his keynote speech, announcing measures to bring it down; gains were reversed on Friday, however, as concerns over the UK cost-of-living crisis subdued GBP.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision
    The Bank of England (BoE) is expected to hike interest by 25bps on Thursday; this could inspire Sterling downside on fears of a recession.
  2. NZ GDP
    New Zealand’s economy is thought to have grown by 0.6% in Q1 2022; if Wednesday’s data confirms this, the ‘Kiwi’ may enjoy upside.
  3. Northern Ireland Protocol
    The UK revealed its proposed amendments to the Northern Ireland Protocol yesterday –so far, the bill has been received poorly. Further criticism may sour UK-EU relations, applying GBP downside.

Pound New Zealand Dollar Forecast

Overall market sentiment will likely have some effect on the Pound New Zealand Dollar exchange rate this week: markets have been bearish recently on recessionary concerns. If a downbeat mood persists, GBP/NZD is likely to trend higher.

 

Olivia Evershed

Contact Olivia Evershed


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