The Pound New Zealand Dollar (GBP/NZD) exchange rate struck a three-week low last week, only to rebound as markets bet on another 50bps rate hike from the Bank of England (BoE).
What’s Been Happening: GBP/NZD Rebounds amid BoE Rate Expectations
The GBP/NZD exchange rate stumbled at the beginning of last week’s session as an improving market mood lifted the risk-sensitive New Zealand Dollar (NZD).
Meanwhile, a confirmed contraction in British factory activity pressured the Pound (GBP) amid ongoing economic concerns. Analysts are worried that the UK is heading for a recession as the BoE continues tightening monetary policy.
The ‘Kiwi’ gained further ground during Wednesday’s overnight session. A cheery mood and NZD’s positive correlation with a stronger Australian Dollar (AUD) lifted the currency.
However, Sterling was able to rebound strongly. The Pound shrugged off recession fears and jumped higher amid rising odds of a half-point hike at the BoE’s August rate decision.
At the same time, a souring market mood saw the ‘Kiwi’ slide.
GBP/NZD was able to hold steady at the end of the week, leaving the currency pair trading at roughly the same level as it started the week.
So far this week, the pairing has spiked to an 11-day high after the UK posted record-high wage growth in May, thereby boosting BoE bets.
Three Things to Watch Out for This Week
- RBNZ Interest Rate Decision
The Reserve Bank of New Zealand (RBNZ) is expected to leave rates unchanged at its meeting on Wednesday morning. If the bank signals that rates have peaked, NZD could slide.
- UK GDP
On Thursday, analysts expect new GDP data to show that the UK economy contracted by 0.3% in May. GBP could slump if the data prints as expected.
- Risk Appetite
Aside from calendar events, risk appetite could drive movement in GBP/NZD. Will a broadly risk-off mood favour Sterling over the ‘Kiwi’?
GBP/NZD Forecast
This week could bring notable volatility to the Pound New Zealand Dollar exchange rate, with the RBNZ decision and UK GDP reading potentially seeing the pairing spike then slump. Shifts in the market mood could also drive turbulence.