Pound-New Zealand Dollar could stay supported if Healey reassures bond markets, although softer UK GDP risks limiting Sterling’s recovery.
The Pound New Zealand Dollar (GBP/NZD) exchange rate briefly hit a seven-week high last week as the ‘Kiwi’ tumbled following the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, although Sterling struggled to sustain its upside.
At the time of writing, GBP/NZD traded at NZ$2.2988, up 0.4% on the week.
DAILY RECAP:
The New Zealand Dollar (NZD) edged lower through the start of the week as an anxious mood dampened the risk-sensitive currency’s appeal.
The ‘Kiwi’ then took a tumble on Wednesday in the wake of the RBNZ’s interest rate decision. Although the bank hiked rates by 25 basis points, as expected, the accompanying commentary said that a rate hike this month reduced the likelihood of bigger increases later in the year.
Through the second half of the week, the New Zealand Dollar managed to regain some ground as market sentiment improved.
Meanwhile, the Pound (GBP) was muted on Monday due to a UK bank holiday before facing mixed movement on Tuesday. An uptick in Bank of England (BoE) interest rate hike bets supported Sterling, but surging bond yields unsettled GBP investors.
The Pound struggled against its stronger peers on Wednesday as gilt yields rose again, hitting a 19-year high. However, GBP was able to climb against the weaker NZD.
Bond market jitters eventually saw Sterling surrender some of its gains on Thursday, while a weaker-than-expected final services PMI also dented GBP.
By the end of the week, however, the Pound did remain slightly up against the ‘Kiwi’ Dollar.
Near-Term GBP/NZD Forecast: UK GDP in Focus
Looking ahead, UK Chancellor John Healey is expected to deliver his first major speech on Monday, with the market response potentially driving notable movement in the Pound.
Healey will likely focus on how to support the country’s fragile economic growth, while also wanting to encourage bond markets that he will stick to the government’s fiscal rules.
A positive reception to his speech could lift GBP, while Sterling could stumble if the speech falls flat or if Healey spooks the bond market.
The key UK data release for the week will be the latest GDP figures on Friday. If the British economy slowed in July, as expected, the Pound could end the week on the back foot.
Meanwhile, New Zealand’s latest manufacturing PMI is due on Thursday. A slight slowdown in factory activity in August could mute NZD.
Elsewhere, market risk appetite could influence the ‘Kiwi’, with any shifts potentially driving volatility.
Our currency coverage draws on live market data, official economic releases and published bank research.
