The Pound New Zealand Dollar (GBP/NZD) exchange rate ticked higher last week, as concerns over Chinese Covid cases kept the ‘Kiwi’ muted. This counteracted concerns over the UK’s economic outlook to benefit Sterling.
What’s Been Happening: GBP Wavers as Outlook Darkens
The Pound (GBP) initially traded narrowly against the New Zealand Dollar (NZD) last week, due to a wavering market mood. However, thin liquidity left Sterling open to pressure from domestic headlines.
Industrial action continued across the country as negotiations between unions and ministers bore no fruit. Chancellor Jeremy Hunt further dented support for GBP by announcing that support for UK business’ energy bills was to be scaled back. This led to warnings from industry bosses that some firms could face closure when the support ends.
However, support came for Sterling on Friday after the surprising news that the UK economy had expanded in November. With a contraction expected, the news brought cheer to GBP investors and provided quiet optimism for the UK’s economic outlook.
Meanwhile, the New Zealand Dollar (NZD) was largely left to trade on risk sentiment over the past week.
Over the course of the week, as the market mood fluctuated so too did the risk-sensitive ‘Kiwi’. Mixed data from China further served to muddy the waters, due to New Zealand’s trading links with the economic superpower.
Three Things to Watch Out For This Week
- UK Inflation
December’s inflation data is forecast to fall on Wednesday. This could prompt a boost for GBP by pointing to easing pressures on UK businesses and households.
- NZ Manufacturing PMI
Thursday brings the release of December’s manufacturing indexes for New Zealand. Can a return to growth boost the ‘Kiwi’?
- UK Retail Sales
December’s UK retail sales data is due on Friday. Should the forecast of an increase come true, GBP may be lifted.
Pound New Zealand Dollar (GBP/NZD) Outlook
The GBP/NZD exchange rate could strengthen this week, as inflationary pressures may begin to ease across the UK. Similarly, increased retail sales would align with previously reported profit increases in the sector, adding further strength to GBP.