The Pound New Zealand Dollar (GBP/NZD) exchange rate traded widely last week, ending the session lower overall, as risk aversion countered a dovish tilt from the Bank of England (BoE).
What’s Been Happening: Pound Tumbles as BoE Delivers Dovish Hike
The Pound (GBP) initially saw tailwinds from forecast-beating GDP data on Monday. However, disappointing jobs data on Tuesday served to cap these gains against most currencies.
A surprise uptick in wage growth cushioned Sterling before Wednesday saw inflation data fall further than expected. As such, traders began to readjust BoE rate hike bets, leading to waning sentiment against Sterling.
Thursday saw the BoE deliver the expected 50bps hike, but dovish forward guidance saw GBP slide. This was then further compounded by poor retail sales data on Friday, which saw GBP close the week on a sombre note.
Meanwhile, the New Zealand Dollar (NZD) began the week on a downturn, as risk aversion muted the risk-sensitive ‘Kiwi’. Furthermore, disappointing data from China further weighed on the currency.
However, far stronger-than-expected GDP data on Wednesday evening strengthened the ‘Kiwi’, supporting it through to the end of the week.
Three Things to Watch Out for This Week
- UK CBI Distributive Trades Data
Wednesday brings the latest retail sales data from the Confederation of British Industry (CBI). A fall to -23 is forecast, which may stoke recession fears and weigh on Sterling.
- NZ Balance of Trade
Overnight on Monday, New Zealand’s latest balance of trade figures are expected. With the deficit expected to narrow, the export-linked ‘Kiwi’ may strengthen.
- UK Industrial Action
With industrial action set to continue in the UK across the week, further disruption could dent GBP. However, should a solution be found, optimism may strengthen Sterling.
Pound New Zealand Dollar Outlook
The GBP/NZD exchange rate could struggle this week, as thin trading conditions may lead investors to focus on domestic headlines. Between the UK grappling with industrial action and a recession, further developments could weaken GBP/NZD.