The Pound New Zealand Dollar (GBP/NZD) exchange rate traded erratically last week until a surprise uptick in UK GDP allayed economic fears and sent Sterling surging.
What’s Been Happening: GBP/NZD Exchange Rate Climbs on Resilient UK Economy
The Pound (GBP) opened the week under pressure amid mounting economic uncertainty despite elevated interest rate hike bets from the Bank of England (BoE).
These economic concerns grew after the National Institute of Economic and Social Research (NIESR) warned that the UK could face five years of lost growth.
At the end of the week, a surprise expansion in GDP sent the GBP/NZD surging to a new seven-year high. Against expectations growth would stagnate the UK economy grew 0.2% in Q2.
Meanwhile, the New Zealand Dollar (NZD) struggled for much of the week amid a declining risk appetite.
Preventing further slides was a surprise uptick in inflation expectations, bolstering bets of further tightening from the Reserve Bank of New Zealand (RBNZ).
However, rising geopolitical tensions between the US and China were compounded by the latter’s stuttering economic recovery. Global growth fears returned to the fray and sapped the market mood, dragging the risk-sensitive ‘Kiwi’ down with it.
Three Things to Watch Out for This Week
- UK Inflation Rate
The UK’s consumer price index is expected to report a sharp cooling of inflation in July. Will this weaken BoE rate hike bets and weaken the Pound?
- RBNZ Interest Rate Decision
Markets predict the Reserve Bank of New Zealand (RBNZ) will leave interest rates on hold again this week. If the bank also reiterates its hiking cycle is over the ‘Kiwi’ could plummet.
- UK Retail Sales
A predicted 0.5% drop in retail sales, the first fall since March, could sap Sterling sentiment at the end of the week.
Pound New Zealand Dollar Forecast
Elsewhere, market sentiment will continue to play a major role in driving GBP/NZD exchange rates this week. Ongoing fears of China’s economic recovery could keep a firm lid on the New Zealand Dollar.