The Pound New Zealand Dollar (GBP/NZD) exchange rate dropped to a four-week low last week as news of Boris Johnson’s resignation rattled Pound (GBP) investors. Subsequently, Sterling was able to recoup some of its losses against the New Zealand Dollar (NZD), as widespread risk aversion subdued the ‘Kiwi’.
What’s Been Happening: Chinese Data, Political Headwinds Affect Trading
The most significant catalyst of movement last week was the resignation of the UK’s prime minister. Boris Johnson was forced to leave office as over fifty members of his cabinet resigned.
Earlier in the week, Sterling support was subdued by dovish rhetoric from the Bank of England (BoE) and a downbeat financial stability report, in which the central bank observed that the economic outlook for the UK and globally has deteriorated materially.
Meanwhile, the New Zealand Dollar was supported by China’s Caixin services PMI for June, which exceeded forecasts.
In the second half of the week, the Pound New Zealand Dollar exchange rate climbed overall amidst a lack of significant data and persistent risk-off headwinds: the ‘Kiwi’ generally fares poorly when market mood is subdued.
GBP gains were capped, however, and GBP/NZD closed the week lower than its opening levels.
Three Things to Watch Out for This Week
- RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) is expected to hike interest by 50bps tomorrow, potentially boosting the ‘Kiwi’ as it may help to cool inflation.
- UK GDP
May’s UK GDP data will be released tomorrow and is likely to dent the Pound if it shows a lack of economic expansion.
- Chinese Data
Chinese trade balance and GDP data may inspire NZD movement this week, given China’s close trading relationship with New Zealand. If the country’s trade surplus shrank in June, the ‘Kiwi’ could tumble.
Pound New Zealand Dollar Forecast
Commodity dynamics could also affect GBP/NZD, alongside New Zealand’s business PMI on Thursday.
If business activity grew as expected in June, the New Zealand Dollar may enjoy tailwinds.