Pound New Zealand Dollar (GBP/NZD) Exchange Rate Weekly Forecast: RBNZ and UK Inflation to Trigger Volatility?

The Pound New Zealand Dollar (GBP/NZD) exchange rate fell last week as disappointing UK jobs data and Reserve Bank of New Zealand (RBNZ) interest rate hike bets weighed on the pairing.

What’s Been Happening: GBP/NZD Drops amid RBNZ Speculation

The Pound (GBP) dropped against the New Zealand Dollar (NZD) early last week as an improving market mood lifted the risk-sensitive ‘Kiwi’.

Sterling faced further losses on Tuesday after UK employment data missed forecasts. The jobless rate unexpectedly ticked higher while wage growth printed below expectations, dampening Bank of England (BoE) rate rise bets.

Meanwhile, the ‘Kiwi’ Dollar marched higher throughout the week as investors bet on a hawkish hike from the RBNZ at its upcoming meeting. After the New Zealand government unveiled large spending plans, which could push inflation higher, markets began pricing in more rate increases from the country’s central bank.

Hawkish comments from BoE Governor Andrew Bailey may have cushioned GBP’s losses, although they weren’t enough to prevent the Pound from falling.

NZD consolidated its gains at week’s end amid an upbeat market mood.

Three Things to Watch Out for This Week

  1. RBNZ Rate Decision

The New Zealand central bank shocked markets by signalling an end to its rate hiking cycle. This sent GBP/NZD soaring to a three-week high.

  1. UK Inflation

The latest UK consumer price index could trigger volatility. A sharp drop in headline inflation could dent GBP, while signs of persistently high core inflation could prompt more BoE bets.

  1. UK Retail Sales

April’s retail sales data rounds off the week. Could a modest recovery in sales help Sterling end on a positive note?

GBP/NZD Forecast

Overall, this week could bring significant swings in the GBP/NZD exchange rate. UK inflation has consistently exceeded forecasts, so another hotter-than-expected reading could see GBP jump. Risk appetite could also infuse the Pound ‘Kiwi’ pair with volatility. Federal Reserve expectations, US debt ceiling news, and geopolitical tensions could all affect the market mood.

Samuel Birnie

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