The Pound New Zealand Dollar (GBP/NZD) exchange rate traded erratically throughout the week as stronger-than-expected UK PMIs were offset by mounting domestic pressures.
What’s Been Happening: GBP/NZD Exchange Rate Fluctuates Despite Increased Rate Hike Bets
The Pound started the week on the back foot amid a lack of major economic data. Optimism regarding a new Northern Ireland protocol deal waned after negotiations stalled again.
Sterling then rebounded on stronger-than-expected PMI data. The services index surprised to the upside and printed at 53.3, the highest level in eight months. A stronger economy helped boost Bank of England (BoE) rate hike expectations, buoying the Pound.
But momentum softened through the rest of the session as domestic headwinds returned. News that the post-Brexit deal remains far from completion also sapped GBP demand.
Meanwhile, the New Zealand Dollar also struggled to find support at the start of the week amid a cautious market mood. Concerns over Russia mounting a fresh offensive soured the market mood.
However, the Reserve Bank of New Zealand (RBNZ) delivered a hawkish 50bps rate hike on Wednesday. The ‘Kiwi’ enjoyed renewed demand as the RBNZ hiked rates to a new 14-year high and signalled more were to come.
At the end of the week an increasingly sour mood dragged the risk-sensitive New Zealand Dollar lower.
Three Things to Watch Out for This Week
- Northern Ireland Protocol deal
The fallout of the post-Brexit trade deal could continue to influence the Pound. Prime Minister Rishi Sunak could have a hard time selling the deal to his own Conservative party, potentially stoking volatility again.
- BoE Bailey Speech
A speech by BoE Governor Andrew Bailey will be closely watched by GBP investors this week. Will hints more interest rates are to come help to boost the Pound.
- Market Sentiment
In the absence of any notable NZD data, the ‘Kiwi’ is likely to remain sensitive to market risk appetite. Potentially weakening if sentiment remains downbeat.
Pound New Zealand Dollar Forecast
Elsewhere, any further headlines out of Ukraine could influence the global market sentiment. With fears growing of China supporting Russia with lethal aid could strain tensions even further.