Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: More Volatility Ahead as Global Recession Fears Grow

The Pound New Zealand Dollar (GBP/NZD) exchange rate has declined so far this week as further strike action and soaring energy costs in the UK rattle GBP investors.

What’s Been Happening: GBP/NZD Stages Shaky Recovery from 19-Month Low

The risk-sensitive New Zealand Dollar (NZD) started last week’s trade on the back foot, retreating from a 19-month high against the Pound (GBP), as signs that China’s economy was slowing sparked widespread risk aversion.

Market sentiment remained sour through the first part of the week, seeing the ‘Kiwi’ fall further.

A 50-bp rate rise from the Reserve Bank of New Zealand (RBNZ) failed to support NZD. The bank’s Governor, Adrian Orr, sounded rather cautious in the subsequent press conference.

Meanwhile, Sterling rose through the first part of the week as traders priced in another half-point rate rise from the Bank of England (BoE). A poll of economists initially boosted rate rise bets, followed by UK jobs data and a hot inflation rate reading.

However, domestic economic woes began to weigh on the Pound. Strike action intensified amid the worsening cost-of-living crisis, with the UK’s outlook growing ever bleaker.

This allowed the ‘Kiwi’ to regain some ground, despite a shifting market mood.

Three Things to Watch Out for This Week

  1. Global Risk Appetite

The New Zealand Dollar is extremely risk sensitive, so the market mood could have a significant impact on GBP/NZD. If worries about a global recession and Federal Reserve rate hikes spook markets, the ‘Kiwi’ could slip.

  1. UK Domestic News

With UK data fairly thin for the rest of the week, domestic UK headlines on the cost-of-living crisis, strike action or the Conservative leadership contest could hurt GBP.

  1. NZ Retail Sales

Economists expect a second-quarter recovery in New Zealand retail sales. Such a result could boost NZD.

GBP/NZD Forecast

This coming week could bring some volatility as a scarcity of notable data leaves the Pound ‘Kiwi’ pair to trade on external factors. A souring global sentiment could weigh on the New Zealand Dollar. However, the UK’s worrying economic outlook will likely keep GBP under pressure.

Samuel Birnie

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