Pound New Zealand Dollar (GBP/NZD) Weekly Forecast: Dovish BoE to Dent the Pound?

The Pound New Zealand Dollar (GBP/NZD) exchange rate wavered lower last week, with the recent uncertainty in financial markets infusing the pair with volatility.

So far this week, GBP/NZD has rallied to a near five-month high. Investors are optimistic about the resilience of the UK’s banking sector following measures to stabilise markets and a statement of reassurance from the Bank of England (BoE).

What’s Been Happening: GBP/NZD Wavers Lower amid Market Uncertainty

The risky New Zealand Dollar (NZD) rose at the start of last week’s trade. Following turmoil in the US banking sector, the possibility of a softer approach from the Federal Reserve cheered global markets.

Meanwhile, Pound Sterling (GBP) wavered lower as a slowdown in UK wage growth dented Bank of England rate hike bets. The unveiling of the British government’s Spring Budget failed to prompt any meaningful movement for GBP.

A larger-than-forecast contraction in New Zealand’s fourth-quarter GDP growth rate rattled NZD investors on Wednesday night, causing the ‘Kiwi’ to slump.

However, after some volatility through the end of the week, NZD was able to strengthen against GBP. A risk-on mood in Asian markets lifted the ‘Kiwi’ while a lack of UK data subdued Sterling.

Three Things to Watch Out for This Week

  1. Bank of England Decision

The BoE meets to set rates on Thursday, a day after the UK’s latest CPI is due out. If UK inflation cools more than expected, policymakers may opt to leave the Bank Rate unchanged; both events could trigger a Sterling selloff. Conversely, stubborn inflation and a 25bps hike could boost GBP.

  1. UK Flash PMIs

On Friday, the latest flash PMI surveys are due out. With manufacturing forecast to improve and the service sector set to remain strong, the Pound could firm.

  1. Risk Appetite

As for the ‘Kiwi’, risk sentiment could drive NZD movement. Banking sector jitters, geopolitical tensions, and the Federal Reserve rate decision on Wednesday could all create volatility.

GBP/NZD Forecast

The coming week could see some notable shifts in the GBP/NZD exchange rate. Overall, Sterling’s fortunes may hinge around the BoE meeting, with a dovish tilt likely to dent the UK currency. GBP could end the week on a positive note, with the flash PMIs and UK retail sales expected to show positive results.

Samuel Birnie

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