Pound-New Zealand Dollar could extend its recovery if weaker New Zealand labour market data continues to dampen RBNZ rate expectations, although improving risk sentiment may support the Kiwi.
The Pound to New Zealand Dollar (GBP/NZD) exchange rate rebounded from a two-month low on Wednesday after weaker-than-expected New Zealand employment figures weighed on the ‘Kiwi’.
At the time of writing, GBP/NZD was trading around NZ$2.2944, up approximately 0.5% on the day.
DAILY RECAP:
The New Zealand Dollar (NZD) retreated during Wednesday’s Asian session after weaker-than-expected labour market data prompted investors to reassess expectations for further Reserve Bank of New Zealand (RBNZ) interest rate hikes.
Official figures showed New Zealand’s unemployment rate climbed to 5.6% in the second quarter, its highest level in more than a decade and above forecasts for a rise to 5.4%.
The report also showed wage growth remained subdued, suggesting underlying domestic inflation pressures may be easing.
The figures came only weeks after stronger-than-expected inflation data had encouraged speculation that the RBNZ could continue tightening monetary policy.
However, the deterioration in employment conditions prompted investors to scale back some of those hawkish expectations, leaving the ‘Kiwi’ under pressure despite a broader improvement in risk appetite following renewed optimism over the reopening of the Strait of Hormuz.
Meanwhile, the Pound (GBP) strengthened following the publication of the UK’s latest services PMI.
July’s final reading was revised higher from the preliminary estimate, confirming the UK’s dominant services sector rebounded strongly after June’s slowdown.
The stronger survey reinforced expectations that the UK economy remains resilient, potentially allowing the Bank of England (BoE) to keep the option of further policy tightening on the table later in 2026.
Near-Term GBP/NZD Forecast: Improving Risk Appetite to Underpin the Kiwi?
Looking ahead, the Pound to New Zealand Dollar exchange rate may struggle to build on Wednesday’s gains if market sentiment continues to improve.
Any agreement to reopen the Strait of Hormuz could encourage investors back into risk-sensitive assets and help the New Zealand Dollar recover.
Conversely, renewed geopolitical tensions or fresh US threats towards Iran could weigh on risk appetite and provide further support for GBP/NZD.
With little UK economic data scheduled through the remainder of the week, Sterling may struggle to establish a strong independent direction.
Our currency coverage draws on live market data, official economic releases and published bank research.
