Pound to New Zealand Dollar Forecast: Pressure Builds

Kiwi inflation data forms the data highlight of the week. Image © Adobe Images

The New Zealand dollar gains on the pound at the start of a new week.

The pound to New Zealand dollar exchange rate (GBP/NZD) falls 0.30% to test 2.3186 on Monday, suggesting a recent period of consolidation is resolving to the downside.

GBP/NZD recovered into 2026 but gains faltered at 2.3456 and consolidation set in.

Having taken a breather, the pair could have continued its journey higher, but we have been wary of chasing GBP/NZD higher, warning readers on a number of occasions that a repeat of last year's highs (at 2.3550) was increasingly unlikely.

That suspicion is proving valid with the pullback of recent days, and we're left with a Week Ahead Forecast that favours downside and a potential test of 2.31.

What's remarkable is that the NZD's gains come despite concerns over an increasingly belligerent Donald Trump, who is getting tough on EU allies over their refusal to let him have Greenland. Usually, falling markets translate into a softer Kiwi.

Yet, perhaps the NZD's response is understandable: New Zealand is detached from the Northern Hemisphere tensions. In fact, we saw last year that the two antipodean currencies often outperformed when the U.S. and EU were squaring up.

So, there could be further NZD upside if tensions escalate from here. Domestic fundamentals are also increasingly favourable to NZD.

"Kiwi yields rose over the day as the run of improving data and sticky inflation causes another re‑think around how long the RBNZ can hold the OCR in accommodative territory," says a note from analyst Samara Hammoud at Commonwealth Bank of Australia.

The RBNZ led its peers in cutting interest rates in 2025, responding to a weak economy. That action weighed heavily on NZD, particularly when it came up against currencies where central banks were less inclined to cut. For example, the Bank of England.

But there's a change in the air: the RBNZ might have to start raising rates again as the economy improves and inflation rises. This can assist a NZD recovery this year.

With this in mind, we're watching the release of Q4 CPI inflation data from New Zealand on Friday.

Economists at ASB are looking for it to print above consensus (and well above target) 3.1% y/y.

If this is correct, we'd expect a NZD rally into the weekend, all else equal.