The Pound New Zealand Dollar (GBP/NZD) exchange rate traded in a wide range last week, as an upside surprise for the UK’s GDP buoyed Sterling.
What’s Been Happening: GBP Rallies as UK Economy Enjoys Surprise Growth
At the beginning of the week, the Pound (GBP) was directionless. The oil giant Shell put a dampener on Brexit optimism by pointing to the US as a better investment prospect.
The British Retail Consortium (BRC) released retail sales news on Tuesday, showing that inflation remained a pressure on UK consumers.
Then, a dovish speech from Bank of England (BoE) policymaker Swati Dhingra added further pressures. With a divergence between the hawkish Federal Reserve and the BoE being noted, GBP remained muted.
However, Thursday saw Sterling’s fortunes begin to reverse, as investors began to buy the dip. Sterling’s gains were consolidated on Friday, following news that the UK’s economy grew by 0.3% in January, calming recession anxieties.
Meanwhile, the New Zealand Dollar (NZD) broadly weakened against most major peers over the week. Due to a quiet data calendar, the ‘Kiwi’ was left vulnerable to external factors.
However, the country’s BusinessNZ PMI exceeded expectations, bringing some gains in mid-week trade. This was then erased by lower-than-expected Chinese inflation, leaving the ‘Kiwi’ to end the week low.
Three Things to Watch Out for This Week
- UK Budget
UK Chancellor Jeremy Hunt will outline his spring budget on Wednesday. GBP investors will be looking for growth-inspiring measures, which could strengthen Sterling.
- NZ GDP Data
New Zealand will publish it Q4 GDP data on Wednesday. A forecast of 0.2% contraction is forecast, which could spark recession anxieties and weaken NZD.
- Chinese Industrial Production
Wednesday also brings China’s industrial production data for the year. Due to New Zealand being a close trading partner with China, a forecast 2.6% increase may boost the ‘Kiwi’.
GBP/NZD Outlook
Elsewhere, the continued adjustment of Federal Reserve rate hike bets is likely to have an impact on the pairing. Following the collapse of the Silicon Valley Bank (SVB) over the weekend, investors are expecting a rate hike pause. This could spark risk-on trade, benefitting the ‘Kiwi’.