The Pound New Zealand Dollar (GBP/NZD) exchange rate fluctuated last week, moving mostly sideways overall, amid high-impact UK events and a shifting market mood.
This week, the Reserve Bank of New Zealand (RBNZ) interest rate decision is in focus, with an expected 75bps hike potentially supporting the New Zealand Dollar (NZD).
What’s Been Happening: GBP/NZD Rocked by UK Economic Events and Market Volatility
The Pound (GBP) dropped against the New Zealand Dollar early last week as anxiety grew over the UK’s struggling retail sector.
Meanwhile, the risk-sensitive ‘Kiwi’ initially enjoyed an upbeat market mood as markets continued to scale back Federal Reserve interest rate rise bets.
Higher-than-forecast UK inflation helped lift Sterling midweek, with investors pricing in more rate hikes from the Bank of England (BoE).
At the same time, a deadly missile strike in Poland raised fears of an escalation in the Russia-Ukraine conflict. This rattled markets, hurting the riskier New Zealand Dollar.
UK Chancellor Jeremy Hunt unveiled the government’s Autumn Statement on Thursday, triggering some volatility and pushing the Pound lower overall.
However, stronger-than-expected UK retail sales helped GBP/NZD recover its losses as the week came to an end.
Three Things to Watch Out for This Week
- RBNZ Decision
Markets expect a jumbo 75bps rate rise at the RBNZ meeting, which could boost the ‘Kiwi’. However, any signals that the bank may slow its pace of tightening could undermine the currency.
- UK PMIs
Economists predict more doom and gloom from the UK’s latest PMI surveys. With business activity forecast to have contracted further, Sterling could slide.
- BoE Speeches
Four policymakers from the British central bank are due to speak this week. GBP could climb if they suggest further aggressive rate hikes may be needed to quell inflation.
The RBNZ decision could cause some turbulence for GBP/NZD this week, as traders respond to the decision and reprice the ‘Kiwi’. Overall, however, we may see the Pound slip if UK data adds to growing fears about Britain’s bleak economic outlook.