The Pound New Zealand Dollar (GBP/NZD) exchange rate soared last week as interest rate hike expectations from the Bank of England (BoE) were bolstered by surging wage growth.
What’s Been Happening: GBP/NZD Exchange Rate Rallies on BoE Expectations
The Pound (GBP) opened the week quiet as a lack of data left investors mulling over the health of the UK economy.
However, on Tuesday record-high wage growth overshadowed rising unemployment and sent Sterling higher on increased rate hike bets.
Midweek, the Pound found further support as core inflation remained sticky. elsewhere, headline inflation cooled to a 17-month low of 6.8% in July.
Preventing further gains at the end of the week were disappointing retail sales figures in July. Against an expected 0.5% decline, sales fell by 1.2% as the UK economy’s resilience was called into question.
Meanwhile, the New Zealand Dollar (NZD) started the week on the back foot. Poor Chinese data weighed on market sentiment and global growth fears mounted.
The ‘Kiwi’ recovered modestly on a hawkish interest rate pause from the Reserve Bank of New Zealand (RBNZ). Despite holding for the second straight meeting, the central bank kept the door open to further hikes.
However, a souring market mood weighed heavily on the risk-sensitive ‘Kiwi’. NZD fell and ended the week on seven-year lows against GBP.
Three Things to Watch Out for This Week
- UK PMIs
A predicted fall in the services PMI could sap demand for the Pound as growth in the crucial services sector is expected to slow for a fourth straight month.
- NZ Retail Sales
Retail sales are expected to decline for a third consecutive quarter as elevated borrowing costs are continuing to temper consumer spending.
- Risk Sentiment
Ongoing fears of China’s stuttering economic recovery could keep a firm lid on the riskier New Zealand Dollar.
Pound New Zealand Dollar Forecast
Elsewhere, the Jackson Hole Symposium kicks off on Thursday. A speech from Federal Reserve Chair Jerome Powell could weigh on market sentiment if he hints at more policy tightening from the US central bank.