The Pound New Zealand Dollar (GBP/NZD) exchange rate fluctuated last week, holding just below the previous week’s three-year high, as a lack of economic data led to uncertain trade.
Looking forward, Bank of England (BoE) bets could see Sterling strengthen this week. Today’s labour market overview exceeded forecasts, with UK unemployment unexpectedly dropping and wage growth accelerating more than anticipated. So far this has failed to boost GBP/NZD amid a risk-on market mood, but it could lift the Pound as this week’s session progresses.
What’s Been Happening: GBP/NZD Holds Strong as Markets Bet on BoE Hikes
The Pound (GBP) stumbled at the start of last week’s trade as the UK currency suffered a market correction.
Meanwhile, the New Zealand Dollar (NZD) benefitted from its positive correlation with the Australian Dollar (AUD), as the latter leapt in the wake of the Reserve Bank of Australia’s (RBA) surprise interest rate hike.
Midweek, GBP/NZD rallied. Renewed Bank of England (BoE) bets boosted Sterling after the Organisation for Economic Co-operation and Development (OECD) upgraded its UK growth forecasts and warned of persistently high inflation.
This underpinned the Pound through to the end of the week. However, an improving market mood boosted the risk-sensitive ‘Kiwi’, helping it claw its way back to its opening level against Sterling.
Three Things to Watch Out for This Week
- UK GDP
Forecasters expect the UK economy to have recovered by 0.2% in April. If so, Sterling could strengthen.
- New Zealand GDP
New Zealand’s first-quarter growth rate could then dent the ‘Kiwi’ Dollar. With a 0.1% contraction expected, the data may confirm that the country’s economy is in recession.
- BoE Expectations
GBP investors will also be looking ahead to the BoE decision next week. Bets on hawkish action from the British central bank could support Sterling, with a speech from BoE Governor Andrew Bailey potentially sparking movement.
GBP/NZD Forecast
If the data prints as expected this week, we could see GBP/NZD reapproach the three-year highs seen at the start of the month. BoE bets could propel the Pound higher, particularly after Tuesday’s hotter-than-forecast jobs data. As for the ‘Kiwi’ Dollar, risk appetite may drive movement. Could an upbeat mood protect NZD from steeper losses?