The Pound New Zealand Dollar (GBP/NZD) exchange rate firmed last week as the ‘Kiwi’ was undermined by a cautious mood.
What’s Been Happening: NZD Dampened amid Shifting Market Mood
At the start of the week, bearish trade undercut the New Zealand Dollar (NZD), as a lack of significant data left it vulnerable.
On Tuesday, New Zealand’s trade deficit eased to NZ$-0.796bn in February, lending support to the antipodean currency. Furthermore, the Pound (GBP) was dented by data releases from the Confederation of British Industry (CBI). In these reports, the CBI found that inflationary pressures were easing.
However, on Wednesday NZD began to tumble against Sterling and other currencies amid a souring market mood. Furthermore, GBP/NZD strengthened as UK retail sales were reported to have climbed in April.
On Thursday, an uptick in New Zealand consumer confidence brought cheer to NZD investors, prompting a modest recovery.
However, towards the end of the week NZD’s close correlation to the Australian Dollar kept it muted due to a sell-off in AUD.
Over the week, GBP investors continued to bet on further tightening from the Bank of England (BoE). These elevated rate hike bets contributed to Sterling strengthening over the ‘Kiwi’.
Three Things to Watch Out for This Week
- NZ Unemployment
Unemployment in the first quarter is forecast to have decreased in New Zealand. Could Tuesday’s data buoy the ‘Kiwi’?
- UK Services PMI
On Thursday, the final services PMI data for April is due to print. An upward revision could bring strength to the Pound.
- Market Sentiment
As a more risk-sensitive currency, a souring market mood could weaken NZD, allowing GBP to gain ground against it.
GBP/NZD Outlook
Elsewhere, Chinese data could provide further impetus for the New Zealand Dollar. On Thursday, the latest Caixin manufacturing PMI is due to print. Economists forecast this to show an uptick in activity during April. This could boost NZD due to the country’s close trade links.