Pound New Zealand Dollar (GBP/NZD) Dropped to 19-Month Low

The Pound New Zealand Dollar (GBP/NZD) exchange rate is trading up this morning, helped by a greater-than-expected rise in UK average earnings (excl. bonuses).

Last week, GBP/NZD dropped to a 19-month low as cost-of-living pressures in the UK dented Pound (GBP) sentiment and the New Zealand Dollar (NZD) rose on RBNZ optimism.

What’s Been Happening: Central Bank Tailwinds Boost NZD

The Pound New Zealand Dollar exchange rate was subdued last week by several tailwinds which bolstered the ‘Kiwi’.

The Reserve Bank of New Zealand (RBNZ) is expected to hike interest rate by 50bps tomorrow, expectations for which lent NZD an upside. Also supporting the currency were positive risk flows and an upbeat business PMI.

In Friday’s Asian session, New Zealand’s business data printed at 52.7 rather than the 49.2 forecast, as manufacturing activity expanded. This fuelled modest ‘Kiwi’ gains – although the index remained short of its long-term average.

Simultaneously denting GBP at the end of the week was a disappointing GDP release – the UK economy fell in Q2 2022 due to a weakness in services and retail.

Earlier in the week, the Pound was depressed by forecasts that energy bills are likely to top £4,200 from January.

Consultancy firm Cornwall Insight commented that the government must make introducing more support over the first two quarters of 2023 a number-one priority.

Three Things to Watch Out for This Week

  1. RBNZ Interest Rate Decision
    The Reserve Bank of New Zealand is forecast to hike interest rates by 0.5% tomorrow, likely boosting ‘Kiwi’ exchange rates.
  2. UK Inflation
    Also on Wednesday, UK inflation is expected to print at 9.8%. An increase in price pressures may uplift Sterling on hopes of more aggressive rate hikes from the Bank of England (BoE).
  3. UK Retail Data
    Friday’s retail data is expected to reveal a fall in UK sales, likely denting Pound appeal.

Pound New Zealand Dollar Forecast

New Zealand’s balance of trade is also scheduled this week. If the country’s deficit increased in July as expected, the New Zealand Dollar could weaken.

Olivia Evershed

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