Pound-New Zealand Dollar could remain elevated if UK inflation keeps BoE tightening expectations alive, while weaker New Zealand growth may weigh on the Kiwi.
The Pound New Zealand Dollar (GBP/NZD) exchange rate hit a near two-month high last week as a risk-off mood weighed on the ‘Kiwi’.
At the time of writing, GBP/NZD traded at around NZ$2.3267, up 1.2% on the week.
Pound to New Zealand Dollar (GBP/NZD): 2.328322 (+0.05%)
Euro to New Zealand Dollar (EUR/NZD): 1.996287 (+0.04%)
New Zealand Dollar to Dollar (NZD/USD): 0.580943 (-0.06%)
DAILY RECAP:
The Pound (GBP) enjoyed a steady start to the week amid a speech from Chancellor John Healey. In his first major address, he focused on boosting growth and reassuring markets that he would take a responsible approach to the public finances. This lent GBP modest support.
Sterling then traded without a clear direction through much of the week as UK data was thin on the ground, although it was able to rise against its more risk-sensitive peers amid a cautious market mood.
On Friday, the UK’s latest GDP figures beat forecasts to show a healthy 0.3% expansion in July. This helped GBP stay afloat, although it failed to prompt a notable upside.
Meanwhile, the risk-sensitive New Zealand Dollar (NZD) came under pressure at the start of the week amid intensifying tensions in the Middle East.
Fresh attacks between Iran and the US rattled markets, with oil prices surging back above $100 per barrel, raising concerns that the crisis could escalate once again.
After hitting a near two-month low against the Pound, the New Zealand Dollar attempted to recover amid some dip-buying.
However, the prevailing risk-off mood kept NZD in check.
Near-Term GBP/NZD Forecast: BoE Decision in the Spotlight
Looking ahead, the first key data release this week is the UK’s latest labour market overview. A forecast rising of unemployment in the three months to July could pressure the Pound, particularly if it’s paired with a cooling of wage growth.
The British consumer price index on Wednesday could then lift Sterling. Markets expect to see headline and core inflation rising in August, with the former forecast to climb from 2.9% to 3.1%.
The main event, however, may be the Bank of England’s (BoE) interest rate decision. No change is expected, leaving the focus on forward guidance. A cautious tone from the bank could undermine the Pound, while a hawkish shift could boost GBP. The employment and inflation data during the first half of the week could shape the BoE’s tone.
Finally for the Pound, a forecast contraction in UK retail sales in August could weigh on GBP on Friday.
Meanwhile, the key economic data release for NZD will be New Zealand’s second-quarter GDP figures. An expected slowdown in growth could sap demand for the ‘Kiwi’.
Our currency coverage draws on live market data, official economic releases and published bank research.
