Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: High-Impact UK Data Could Drive Volatility

The Pound New Zealand Dollar (GBP/NZD) exchange rate wavered higher last week, staging a modest recovery after Sterling’s sell-off following the Bank of England (BoE) meeting.

So far this week, GBP/NZD has once again slipped as UK economic fears intensify.

What’s Been Happening: GBP/NZD Crawls Up from One-Month Low

The Pound (GBP) started the week well against the New Zealand Dollar (NZD), recovering some of the previous week’s losses. Sterling enjoyed some dip-buying while a downbeat market mood weighed on the risk-sensitive ‘Kiwi’.

Markets remained bearish through the first part of the week, allowing GBP/NZD to waver higher. This came despite troubling news about struggling UK businesses, raising concerns about the UK economy.

Despite an improving market mood, the ‘Kiwi’ was initially unable to reclaim ground against the Pound due to an unexpected contraction in New Zealand’s business PMI.

However, the risk-on rally continued, marshalling support for NZD. Meanwhile, UK GDP data revealed that the economy contracted in the third quarter of 2022, stoking worries about a likely recession.

The Pound ‘Kiwi’ pair trimmed its gains, but remained up on the week.

Three Things to Watch Out for This Week

  1. UK Inflation Rate

Economists expect UK inflation to continue climbing. While this may boost BoE interest rate rise bets, it could also spell more pain for the UK economy.

  1. UK Autumn Statement

Chancellor Jeremy Hunt will likely unveil a tighter approach to fiscal policy, which could restore the UK’s financial credibility but also worsen its recession. The market response to the statement could be vital for the Pound.

  1. Risk Appetite

With New Zealand data thin on the ground, risk appetite will likely be the key driver of NZD movement this week.

GBP/NZD Forecast

In addition to the UK CPI and fiscal statement, we have the latest British retail sales data on Friday. Economists expect a modest recovery after September’s slump, which may support the Pound. All in all, this week may bring heightened volatility in GBP/NZD. A bleaker outlook for the UK economy may see Sterling slip further.

Samuel Birnie

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