GBP/NZD Outlook:
Bearish, as the rate is below its recent average and near recent lows, influenced by a cautious policy from the Bank of England.
Key drivers:
• Rate gap: The Bank of England's dovish stance, with expectations of possible rate cuts, weighs on the GBP compared to the Reserve Bank of New Zealand's opposite trajectory with signals for rate reductions.
• Risk/commodities: High dairy prices are supporting New Zealand's export income, which underpins the NZD amidst fluctuating global risk appetite.
• One macro factor: Political uncertainty in the UK continues to create volatility for the GBP, although some optimism surrounds Prime Minister Starmer's leadership stability.
Range:
The GBP/NZD rate is expected to remain stable within its recent trading range, with limited upward movement anticipated.
What could change it:
• Upside risk: A surprisingly strong UK GDP figure could lead to a rebound in the GBP.
• Downside risk: Any indication of accelerated rate cuts from the Bank of England could further pressure the GBP.