The Pound New Zealand Dollar (GBP/NZD) exchange rate zigzagged throughout last week as the Reserve Bank of New Zealand (RBNZ) surprised markets by raising interest rates by 50bps.
What’s Been Happening: GBP/NZD Exchange Rate Firms despite Scarce UK Data
The Pound (GBP) opened the week subdued amid a lack of major data. However, elevated rate hike bets from the Bank of England (BoE) kept Sterling supported. BoE Chief Economist Huw Pill hinted at another rate hike at the May meeting, saying that the central bank needs to ‘see the job through’.
Providing more support for the Pound was the upwardly revised final services PMI. A second straight month of growth was boosted by improved business optimism going forward.
End of the week and a steadily improving housing market cheered investors as house prices climbed by 0.8%, a third month of growth.
Meanwhile, the New Zealand Dollar (NZD) wavered through the first half of the week until the RBNZ surprised markets and raised rates by 50bps, above expectations of a 25bps hike. The move spurred investors and the ‘Kiwi’ jumped to a 13-day high.
However, a more dovish forward guidance from the central bank tempered expectations of further hikes, and the New Zealand Dollar soon lost steam. A souring mood also dented the risk-sensitive ‘Kiwi’.
Three Things to Watch Out for This Week
- UK GDP
The UK economy is predicted to expand 0.1% in February, marking the second month of growth after a 0.5% contraction in December. Such a reading could see Sterling firm.
- BoE Speeches
If BoE policymakers continue to signal further interest rate rises ahead, this could also lend support to GBP exchange rates.
- NZ Business PMI
With New Zealand’s latest PMI forecast to hold steady, a below- or above-forecast reading could dent or lift NZD, respectively.
Pound New Zealand Dollar Forecast
Elsewhere, global market sentiment could be a key driver for the New Zealand Dollar. Could hopes of a less aggressive Federal Reserve cheer investors, thereby boosting the ‘Kiwi’?