GBP/NZD Exchange Rate Rocked by BoE’s Cautious UK Economic Outlook

The Pound New Zealand Dollar (GBP/NZD) exchange rate ticked higher over the past seven days amid some volatile shifts to risk appetite. Additionally, a pessimistic outlook for the UK economy continued to weigh on Sterling over the week which may have pulled the exchange rate lower.

What’s Been Happening: Pound Slumps amid Cautious BoE Stance

The Pound (GBP) struggled against its competitors over the past seven days. Sterling Initially stumbled as a result of fresh Brexit uncertainty as MP’s backed the government Northern Ireland protocol bill.

A dovish speech from Bank of England (BoE) Governor Andrew Bailey on Wednesday further undermined Sterling sentiment. Bailey signalled that the central bank may not need to ‘act forcefully’ amid signs of an economic slowdown.

An above-forecast fall to manufacturing sector growth on Friday also dragged on GBP exchange rates. Higher prices for raw materials and supply chain disruptions were highlighted as potential factors.

The New Zealand Dollar (NZD) remained largely at the whims of risk appetite over the past seven days amid a lack of significant data.

Upbeat data releases from China may have helped to bolster the ‘Kiwi’, however. Thursday and Friday’s manufacturing PMIs rose above forecasts.

Weekly highlights

  1. Bank of England Speeches

Several BoE policymakers, including Governor Bailey are scheduled to speak this week. Will a broadly cautious consensus see Sterling slip?

  1. UK Political Jitters

As Prime Minister Boris Johnson faces pressure from all sides, will fears of a fresh leadership challenge dent confidence in the Pound?

  1. Market Risk Appetite

In the absence of any notable NZD data releases, the New Zealand Dollar is likely to remain highly sensitive to market sentiment this week. Potentially weighing on the ‘Kiwi’ if the risk-off mood persists.

GBP/NZD Forecast

If investors further pare back bets of a BoE rate hike, then the GBP/ZAR exchange rate could shed some of its gains.

Shifts to risk appetite could also prompt movement in the pairing amid fears of a global economic slowdown. Additionally, soaring Covid-19 cases in New Zealand could weigh on NZD.

Gareth Monk

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