GBP/NZD Outlook:
Bearish, as the rate is below its recent average and near recent lows amidst UK political instability and a dovish Bank of England.
Key drivers:
• Rate gap: The Bank of England's recent dovish policy contrasts with the Reserve Bank of New Zealand, which may consider interest rate cuts to spur growth, widening the rate gap.
• Risk/commodities: Rising dairy prices support the New Zealand dollar, while positive risk appetite enhances its strength.
• One macro factor: UK retail sales show growth, but ongoing political uncertainty clouds the outlook for GBP.
Range:
GBP/NZD is likely to hold near current lows within its stable recent range.
What could change it:
• Upside risk: A surprise rebound in GBP due to strong economic data could shift momentum.
• Downside risk: Continued political instability in the UK may further weaken the pound.