GBPNZD has a double inflation release ahead on Wednesday, with the UK and New Zealand economies producing price reports.
GBPNZD – Weekly Chart
The GBPNZD foreign currency exchange rate has two overhead targets at the 2.03 and 2.05 levels, with downside support at 1.95.
For the United Kingdom, traders will be looking to see if the annual inflation rate can get back below double digits. The expectation is for a 9.8% reading from the British economy which is higher than other G7 countries despite the interest rate hikes.
Britain’s unemployment rate was seen rising again, with vacancies falling for a ninth month on Tuesday as the economic outlook takes its toll on the UK jobs market. The Office for National Statistics (ONS) said the unemployment rate increased to 3.8%, with analysts expecting it to stay at 3.7%.
Most economists expected the rate to remain unchanged, a 7.1% reading expected after 7.2% last month.
GBPNZD Forecast
New Zealand raised its interest rates to 5.25% while the UK went to 4.25%. The Kiwi economy saw a 7.3% peak in inflation, and the interest rate hikes need to bring rates down quickly. The UK is in the same position, so a beat on expectations for inflation could be a significant driver of the exchange rate in coming sessions.
The UK is said to be “turning a corner”, according to the EY ITEM Club think tank.
However, the looming recession in New Zealand is tipped to be twice as deep as previous forecasts, with Kiwis being warned to prepare for a tough year. The latest forecast from economists at ASB comes as food prices rose at their fastest annual rate in more than 30 years, with many unable to afford basics. ASB predicts a 2% decline in GDP by early 2024, double the 1% that the bank forecasted in its last quarterly update.
And the expected recession is now likely to hit earlier, according to the ASB, with GDP falling 0.6% in the December 2022 quarter.
Traders should look for any deviation in the inflation rates and play the appropriate trend.
