The Pound New Zealand Dollar (GBP/NZD) exchange rate fluctuated last week, heading sideways overall, amid upbeat UK data and a risk-on market mood. This week, the Reserve Bank of New Zealand (RBNZ) interest rate decision is in focus. Could a hawkish hike boost the New Zealand Dollar (NZD)?
What’s Been Happening: GBP/NZD Moves Sideways as Both Currencies Find Support
The Pound New Zealand Dollar exchange rate jumped higher at the start of last week’s trade as positive UK sales data and a cheery mood in European markets lifted Sterling.
The risk-sensitive New Zealand Dollar then recouped these losses amid an upbeat market mood. However, a sudden souring of sentiment saw NZD quickly fall back down.
Risk appetite improved again as the week went on, with markets stabilising. This reduced the volatility and allowed the ‘Kiwi’ to regain ground against the Pound (GBP).
Sterling resisted steeper losses, however, thanks to upbeat GDP data on Friday. The final growth rate for the fourth quarter of last year was revised up to 0.1%, confirming that the UK avoided a recession in 2022.
Three Things to Watch Out for This Week
- RBNZ Interest Rate Decision
The RBNZ meets midweek to set monetary policy, and economists expect the bank to raise interest rates by 25bps. If the RBNZ increases rates and hints at more hikes to come, the ‘Kiwi’ could climb.
- BoE Expectations
Meanwhile, GBP investors will be trying to gauge the likelihood of another Bank of England (BoE) rate rise next month. A speech from Chief Economist Huw Pill could provide clues, while the bank’s latest statement on financial policy could also impact expectations.
- Risk Appetite
The market mood will also likely play a role in the Pound ‘Kiwi’ pair. NZD could stay strong if sentiment remains risk-on.
GBP/NZD Forecast
This week could see GBP/NZD weaken if the RBNZ strikes a hawkish tone and markets remain upbeat. The UK’s final services PMI could also trigger some movement. A higher-than-expected score would likely lend Sterling strong support, while a weaker reading could dent the Pound.