The Pound New Zealand Dollar (GBP/NZD) exchange rate trended broadly higher last week as Pound (GBP) sentiment remained upbeat amid optimistic Bank of England (BoE) rate hike bets.
Into this week, GBP/NZD extends the uptrend on widespread risk aversion.
What’s Been Happening: NZ Business Confidence Impresses, BoE Dynamics Buoy GBP
Sterling trended sideways against the New Zealand Dollar (NZD) at the beginning of the week, as data from the Confederation of British Industry (CBI) printed mixed. On Tuesday, the UK’s retail sales balance fell to its weakest level in sixteen months.
Subsequently, the Pound (GBP) trended up against the ‘Kiwi’ as AU inflation missed forecasts, denting NZD on account of its close correlation with the Australian Dollar.
Bullish rate hike bets further supported GBP as the week progressed, with a poll of Reuters economists finding that Thursday’s BoE interest rate decision is set to be a very close call.
Hopes of a 50bps rate hike follow record-high inflationary pressures: new analyses revealed that home energy bills in the UK could soar to £3,850 from January.
GBP/NZD dipped on Thursday as New Zealand’s ANZ business confidence improved in July; the exchange rate subsequently trended up, however, on persistent BoE optimism.
News of planned strikes across multiple sectors in the UK failed to dent the Pound significantly and NZD trended down at the end of the week as Chinese data disappointed.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
If the Bank of England hikes by 50bps rather than 25bps on Thursday, GBP may climb.
- NZ Employment Data
Unemployment in New Zealand is expected to have fallen in Q2, potentially buoying the ‘Kiwi’.
- Chinese Services Data
If Chinese service sector activity increased as forecast in July, NZD may climb due to its strong trading relationship with China.
Pound New Zealand Dollar Forecast
The UK’s finalised services PMI could also affect GBP/NZD, capping gains for the Pound if it prints below expectations.
Yesterday’s manufacturing index missed earlier estimates, dampening Sterling support.