The Pound New Zealand Dollar (GBP/NZD) exchange rate traded widely last week, as a wavering market mood carried the risk-sensitive ‘Kiwi’.
What’s Been Happening: Market Mood Shifts in Favour of NZD
The New Zealand Dollar (NZD) began last week in good shape, as the forecast-beating Chinese GDP data for Q4 provided a boon.
Over the course of the week, wavering risk appetite served to favour the risk-sensitive NZD, with optimistic trade lifting the ‘Kiwi’. Furthermore, the Reserve Bank of New Zealand (RBNZ) came under pressure during the week as food inflation increased in December.
However, Thursday saw NZD tumble as former Prime Minister Jacinda Ardern announced her shock resignation. Yet, persistent rate hike bets served to cushion the currency, with a risk-on mood serving to revitalise the ‘Kiwi’ as the week closed.
Meanwhile, the Pound (GBP) strengthened last week due to steady core inflation in December and hotter-than-expected wage growth in November. This kept the pressure on the Bank of England (BoE) to continue hiking interest rates, underpinning Sterling through a shifting market mood.
However, Friday sent GBP rates tumbling as the UK’s retail sales in December took a sharp, unexpected fall.
Three Things to Watch Out for This Week
- UK PMIs
January’s flash PMIs for the UK showed continued contractions in manufacturing and service sectors. Will this weigh on GBP?
- NZ Inflation
Overnight, NZ inflation data is due to print. A fall in headline inflation is forecast, which may weaken the ‘Kiwi’.
- UK CBI Data
Later this morning and Friday, the Confederation of British Industry (CBI) is due to release a glut of data, each pessimistic which could dent Sterling.
Pound New Zealand Dollar (GBP/NZD) Outlook
The Pound New Zealand Dollar exchange rate could narrow this week, as rate hike expectations from the RBNZ may fall. Meanwhile, a bleak economic outlook in the UK could weigh on Sterling, sapping support.