GBP/NZD Weekly Forecast: Central Bank Decisions to Drive Volatility?

After gaining ground last week, the Pound New Zealand Dollar (GBP/NZD) exchange rate has slumped this week. Worries about the UK economy are weighing on the Pound (GBP), while a risk-on mood boosts the New Zealand Dollar (NZD).

What’s Been Happening: GBP/NZD Recovers as Sunak Becomes PM

Global market sentiment drove most movement in the risk-sensitive New Zealand Dollar last week amid a lack of notable data.

A bearish turn in markets saw NZD slump as the week’s trade got underway. However, over the next few days a risk-on impulse kept NZD afloat.

The ‘Kiwi’ shrugged off an unexpected decline in business confidence on Tuesday night to hold its own against a strengthening Pound.

However, risk aversion returned to markets on Friday and NZD ended the week on a low.

Meanwhile, Sterling stumbled out of the gate on Monday after the UK’s latest PMIs indicated that the country is already in a recession.

The Pound clawed back these losses, however, as markets cheered Rishi Sunak’s appointment as Prime Minister.

Despite a brief dip on Thursday, optimism in UK markets bolstered GBP through to the end of Friday’s trade. GBP/NZD ended the week up around 2.4%.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision

Amid uncertainty over the forthcoming fiscal statement, the Bank of England (BoE) could raise interest rates by 50bps or 75bps. If the bank opts for a smaller half-point hike, GBP could slip.

  1. RBNZ Financial Stability Report

The Reserve Bank of New Zealand’s (RBNZ) twice-yearly report will set out the state of the country’s financial system. If it reveals that the country’s institutions are strong enough to support the economy through further interest rate rises, the ‘Kiwi’ could climb.

  1. Risk Appetite

The global market mood will continue to have a big impact on NZD. If sentiment sours, the New Zealand Dollar could stumble.

GBP/NZD Forecast

This week could bring renewed volatility to GBP/NZD. Alongside the BoE decision, the Federal Reserve meeting could cause turbulence, so we may see some spikes and slumps in the Pound ‘Kiwi’ pair.

Samuel Birnie

Contact Samuel Birnie


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