Bias: The current level of GBP/NZD is above the 90-day average and positioned in the upper half of the three-month range, signaling a bullish-to-range-bound outlook.
Key drivers:
- Rate gap: The Bank of England is expected to cautious about cuts while the Reserve Bank of New Zealand has started an easing cycle, which may widen the interest rate differential against the NZD.
- Risk/commodities: The NZD is weakening amid a risk-off mood in the market, making it less attractive compared to the more stable GBP.
- Global Trade Dynamics: Ongoing trade tensions affecting New Zealand exports could contribute further pressure on the NZD, limiting its recovery prospects against the GBP.
Range: GBP/NZD is likely to drift within its recent stable range, with potential fluctuations driven by external factors.
What could change it:
- Upside risk: A positive surprise in UK economic data could strengthen the GBP further.
- Downside risk: Continued risk aversion could push the NZD lower, negatively impacting its exchange rate against the GBP.