The Pound New Zealand Dollar (GBP/NZD) exchange rate briefly touched a fresh three-year high last week before shedding its gains amid growing concerns about the UK economy.
What’s Been Happening: GBP/NZD Retreats as UK Concerns Stifle Sterling
The Pound (GBP) initially slipped against the New Zealand Dollar (NZD) last week as an upbeat market mood lifted the risk-sensitive ‘Kiwi’.
Sterling was then able to rally as the session unfolded, with Bank of England (BoE) interest rate rise bets supporting the UK currency.
Meanwhile, a large contraction in Chinese industrial profits piled pressure on NZD exchange rates, due to the close trading relationship between New Zealand and China.
After striking a new three-year high, GBP/NZD then began to weaken amid intensifying anxiety over the UK’s economic outlook. An emerging crisis in the British water sector added to fears of a looming recession.
Improving business and consumer confidence in New Zealand aided NZD’s recovery against Sterling, with the latest ANZ data releases exceeding expectations.
An upbeat market mood also helped the ‘Kiwi’ regain ground at the end of the week, but a confirmed expansion in UK first-quarter GDP underpinned the Pound.
Three Things to Watch Out for This Week
- UK Services PMI
The UK’s final services PMI is the only data release of note this week. An expected slowdown in activity could dent the Pound, while a revised reading could cause volatility.
- UK Domestic News
GBP investors will be keeping a close eye on domestic headlines about the British economy. Growing concerns about a looming recession could weigh on Sterling.
- Risk Appetite
Amid a lack of New Zealand economic data, the market mood could drive NZD movement. Signs of slowing growth in China or hints of more rate hikes from the Federal Reserve could trigger risk aversion, which in turn would likely weigh on the ‘Kiwi’.
GBP/NZD Forecast
With economic data thin on the ground this week for both GBP and NZD, we could see some choppy movement in the Pound New Zealand Dollar exchange rate. Risk appetite will likely have a notable impact, with the Fed’s meeting minutes potentially affecting market sentiment.