The Pound New Zealand Dollar (GBP/NZD) exchange rate strengthened last week, although the Bank of England (BoE) interest rate decision caused some choppy trade.
What’s Been Happening: GBP/NZD Wavers Higher amid BoE Decision
The Pound (GBP) rallied through the first half of last week as calm returned to the European banking sector following the previous week’s turmoil. As the world’s largest central banks stepped in to soothe market nerves, the BoE gave reassurance that the UK’s financial sector ‘remains safe and sound’.
BoE policy expectations saw GBP waver as the week went on. The recent signs of instability in financial markets and above-forecast UK inflation resulted in mixed bets.
However, the BoE raised rates by 25bps and signalled that another hike is possible at its next meeting. This, paired with above-forecast retail data, saw Sterling end the week on a high.
Meanwhile, the New Zealand Dollar (NZD) was at the mercy of the market mood last week amid a notable lack of economic data.
As European markets rallied, Asian investors grew fearful of a hawkish Federal Reserve decision, denting NZD.
A slightly dovish tone from the Fed saw the ‘Kiwi’ claw back some losses through the middle of the week.
However, sentiment soured at week’s end, putting the New Zealand Dollar on the back foot.
Three Things to Watch Out for This Week
- Banking Sector News
While calm has once again returned to markets this week, there could be more volatility in store. Fresh signs of instability in European financial markets could hurt Sterling.
- UK GDP
On Friday, the UK’s final GDP growth rate reading is due out. Could confirmation that the UK avoided a recession last year support the Pound?
- NZ Business Confidence
A forecast improvement in New Zealand business confidence may provide the ‘Kiwi’ with some support during Wednesday’s overnight trade.
This week could see more subdued movement in the Pound ‘Kiwi’ pair amid a scarcity of high-impact economic data. Developments in the European banking sector could end up being the main driver of movement. If things continue to stabilise, Sterling could hold strong.