Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: Exchange Rate Wavers, Spikes Following BoE Interest Rate Decision

The Pound New Zealand Dollar (GBP/NZD) exchange rate fluctuated over the course of last week, peaking on Thursday as the Bank of England (BoE) hiked interest rates by 25bps.

What’s Been Happening: Both UK and NZ GDP Miss Expectations

At the beginning of the week, GBP/NZD wavered as the Pound (GBP) fell on weaker-than-expected GDP data while the New Zealand Dollar (NZD) succumbed to risk-off headwinds.

Sterling downside persisted on Tuesday as UK jobs data disappointed. The Pound New Zealand Dollar exchange rate sloped as unemployment rose to 3.8%.

Midweek, GBP recouped some of its losses, supported by a risk-on mood. Meanwhile, the ‘Kiwi’ was subdued ahead of New Zealand’s GDP release, which subsequently revealed that the economy contracted by 0.2% in Q1 2022.

The Pound shot up against NZD on Thursday, supported initially by ‘Kiwi’ downside and then the BoE’s interest rate decision. Markets now expect consecutive interest rate hikes, to bring interest above 3pc by the end of 2022.

On Friday, the Pound New Zealand Dollar exchange rate fell as both currencies lacked macroeconomic trading stimuli – Sterling headwinds were exacerbated by forecasts that inflation is likely to climb above 11% in October.

Three Things to Watch Out for This Week

  1. UK Inflation

UK inflation will print tomorrow and is estimated to have risen to 9.1% in May on an annualised basis. Such news could inspire GBP headwinds on stagflation concerns.

  1. NZ Trade Balance

New Zealand’s trade surplus is expected to have shrunk in May according to this evening’s data. If predictions are accurate, NZD could sink.

  1. UK Retail Sales

Friday will see the release of the UK’s retail data: sales are expected to have fallen in May by 4.5%. Could this inspire bearish GBP trading?

Pound New Zealand Dollar Forecast

Also affecting GBP/NZD this week are likely to be political factors and disruption to the UK’s travel sector. Today marks the biggest rail staff strike in 30 years as workers campaign for better pay and conditions.

Olivia Evershed

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