Pound-New Zealand Dollar could remain volatile as UK GDP, New Zealand confidence data and wider risk sentiment shape the pair.
The Pound New Zealand Dollar (GBP/NZD) exchange rate was volatile last week, rising to a six-day high before sliding to a nine-day low.
At the time of writing, GBP/NZD traded at NZ$2.3383, virtually unchanged on the week.
Pound to New Zealand Dollar (GBP/NZD): 2.338311 (+0.10%)
Euro to New Zealand Dollar (EUR/NZD): 2.011123 (0.00%)
New Zealand Dollar to Dollar (NZD/USD): 0.566475 (+0.17%)
DAILY RECAP:
The pound (GBP) started the week on the back foot as UK consumer confidence fell to a three-year low, with households increasingly concerned about the prospect of higher interest rates and potential tax hikes.
Sterling then wavered as a surge in UK government borrowing in August weighed on sentiment. However, better-than-forecast manufacturing data and falling oil prices helped GBP avoid further losses.
The pound came under further pressure midweek after the UK’s services PMI slowed more than expected in September, with the survey falling to 51.7 from 52.5 in August.
GBP remained subdued as signs of weakening consumer spending emerged, with the latest Confederation of British Industry’s (CBI) distributive trades survey reporting record-low retail order volumes in September.
However, Sterling regained some ground at the end of the week after Bank of England (BoE) Governor Andrew Bailey said elevated energy prices made it harder for the central bank to avoid raising interest rates.
Meanwhile, the risk-sensitive New Zealand Dollar (NZD) started last week’s session off on the back foot amid an anxious market mood.
After striking a six-day low against the Pound, the ‘Kiwi’ then rallied. Reserve Bank of New Zealand (RBNZ) Governor Anna Breman warned that the recent rise in oil prices would likely lead to higher inflation, fuelling bets for further interest rate hikes.
However, NZD trimmed its gains as the week went on, with ongoing risk aversion weighing on the currency.
Although risk appetite picked up towards the end of the week, a slight dovish repricing of RBNZ bets subdued the ‘Kiwi’.
Near-Term GBP/NZD Forecast: Risk Appetite to Drive the Pairing?
Looking ahead, fresh UK economic data is thin on the ground this week, with the only key British data being the finalised GDP figures and manufacturing PMI.
The GDP data on Wednesday is expected to show that the UK economy slowed in the second quarter but remained relatively healthy. If the figures are revised lower or higher, Sterling could slip or strengthen, respectively.
Meanwhile, the final manufacturing PMI could lend GBP modest support on Thursday if it confirms an improvement in activity in September.
As for the ‘Kiwi’, a forecast improvement in New Zealand business confidence could support NZD exchange rates on Wednesday morning.
On Thursday evening, the latest consumer confidence index is also out. No change is expected, but any surprise results may drive volatility.
Finally, risk sentiment will continue to influence the risk-sensitive New Zealand Dollar, and could potentially be the main driver of GBP/NZD movement. Could hopes for a deal to reopen the Strait of Hormuz cheer markets and boost the ‘Kiwi’?
