The Pound New Zealand Dollar (GBP/NZD) exchange rate whipsawed last week, as the UK’s economic outlook continued to darken.
What’s Been Happening: GBP Pressured by Domestic Headlines
The Pound (GBP) began the week on the defensive, as Financial Times economists predicted the UK’s recession would be the worst of all G7 members.
Sterling then traded erratically through the week. An upwardly revised manufacturing PMI helped GBP to advance in the first half of the week. Although concerns over ongoing industrial action may have capped these gains.
Fluctuating risk appetite then infused some notable volatility in the GBP/NZD exchange rate through the middle of the week.
Friday then saw the Pound retreat again, with GBP/NZD closing the session close to where it opened the week, following a contraction in the service sector.
Meanwhile, the New Zealand Dollar (NZD) zigzagged through the week as the mixed market mood led to swings in the risk-sensitive ‘Kiwi’.
On a more positive front NZD was supported by optimism towards China’s economy.
Despite contractions across the private sector, analysts remain confident that the Chinese economy will recover. As such, the ‘Kiwi’ was lifted by New Zealand’s close trade links with China.
Three Things to Watch Out for This Week
- UK GDP
Friday brings the release of November’s GDP data for the UK. A MoM contraction is expected, which could pull Sterling lower.
- Chinese Inflation
Optimism is abound regarding China’s economic reopening. The latest CPI data is expected to show an uptick, which could boost NZD as the second largest economy avoids deflation.
- UK Industrial Action
As Monday’s talks appeared fruitless, further industrial action could weigh on the Pound if further action is announced.
Pound New Zealand Dollar (GBP/NZD) Outlook
The Pound New Zealand Dollar exchange rate could weaken this week, with thin trade bringing the spotlight to domestic issues. Industrial action is likely to continue across the UK, which may place a cap on Sterling. Meanwhile, further positivity from China could send the ‘Kiwi’ higher against its peers.