The Pound New Zealand Dollar (GBP/NZD) exchange rate dropped over the past week after the Bank of England’s (BoE) latest economic forecasts.
What’s Been Happening: Pound Tumbles as BoE Forecasts Inflation Passing 13%
The Pound (GBP) initially firmed last week ahead of the BoE’s latest interest rate decision, amid expectations for a 50bps hike.
While the BoE’s raised rates by 50bps as forecast, the bank’s accompanying forecasts prompted Sterling to nosedive, however. The central bank predicted that soaring inflation may push the UK into a fourth quarter recession.
The New Zealand Dollar (NZD) also struggled last week. The Kiwi weakening in sympathy with the Australian Dollar after the latter was undermined by a dovish Reserve Bank of Australia (RBA).
Poor employment data may have also weighed on NZD last week after unemployment increased to 3.3% in the second quarter. This may have prompted investors to pare back bets on further tightening from the Reserve Bank of New Zealand (RBNZ).
Weekly highlights
- UK GDP
The UK’s latest GDP release is forecast to show a contraction in the UK economy in June and a slump to second quarter growth. Will the figures increase fears of a recession and push Sterling lower?
- New Zealand Manufacturing PMI
Growth in the NZ manufacturing sector is predicted to contract for the second consecutive month. Will the predicted slowdown limit bets on further action from the RBNZ?
- UK Balance of Trade
The UK’s trade deficit is currently at its smallest since February. If the deficit narrows further, could it provide support to the beleaguered Pound?
GBP/NZD Forecast
Political uncertainty in the UK may continue to weigh on the Pound in the coming week. The UK government is facing criticism over its lack of response to soaring energy costs.
Significant movements in the Australian Dollar could also see action for NZD. A fall in Australian consumer confidence on Tuesday may see the Kiwi drop, as well as a forecast rise to Chinese inflation on Wednesday.