The Pound to New Zealand Dollar (GBP/NZD) exchange rate ended July near 2.2896, close to the month’s low after the Kiwi erased Sterling’s earlier advantage.
New Zealand’s labour-market report now provides the week’s main event risk.
WEEKLY RECAP:
The Pound to New Zealand Dollar exchange rate (GBP/NZD) retreated sharply through the closing sessions of July, falling from above 2.30 as the New Zealand Dollar outperformed.
Pound Sterling retained some support following the Bank of England’s decision to leave Bank Rate at 3.75%.
Three policymakers voted for an immediate increase, although Governor Andrew Bailey played down the urgency of another move.
In its latest client brief, Scotiabank said Sterling remained “well supported by yield spreads overall”, but softened BoE hawkishness limited further gains.
The New Zealand Dollar benefitted from a firmer domestic rate outlook.
The Reserve Bank of New Zealand raised the Official Cash Rate to 2.50% in July, its first increase in three years. Markets continue to price another move in September and further tightening before year-end.
ING economists had described July’s increase as an “insurance” hike. However, they warned that the possibility of a one-off move could restrict the Kiwi’s upside.
This week’s employment figures should now help determine whether the RBNZ can justify pressing ahead.
Near-Term GBP/NZD Forecast: New Zealand Jobs Report Takes Centre Stage
For Pound Sterling, Monday’s final manufacturing PMI is followed by Wednesday’s services PMI and Thursday’s construction survey.
Manufacturing and services are expected to remain in expansion territory. Construction is forecast to improve from 38.4 to 40.0, although another sub-50 reading would still point to contraction.
For the New Zealand Dollar, Tuesday brings the latest Global Dairy Trade auction.
Wednesday’s labour report is more important. Employment is forecast to rise 0.1% during the second quarter, while unemployment is expected to increase from 5.3% to 5.4%. Labour costs are forecast to climb 0.6%.
Stronger hiring or wage growth could reinforce RBNZ tightening expectations and push GBP/NZD towards 2.2700.
A weaker report would challenge the case for further rate rises and could lift the pair back towards 2.3200.
Our currency coverage draws on live market data, official economic releases and published bank research.
