GBP/NZD Outlook:
The GBP/NZD exchange rate is currently below its recent average and near recent lows, indicating a bearish outlook. Recent UK economic data provided some support for the pound, but uncertainty regarding political developments may limit any rebound.
Key drivers:
• Rate gap: The Bank of England is maintaining interest rates at steady levels, while the Reserve Bank of New Zealand continues a hawkish approach with higher rates aimed at controlling domestic inflation.
• Risk/commodities: The recent volatility in oil prices has pressured global risk appetite, negatively impacting the kiwi as New Zealand's economy is sensitive to commodity trends.
• One macro factor: Mixed employment data in New Zealand suggests a softening labor market, which may weigh on the NZD if concerns about economic health persist.
Range:
GBP/NZD is likely to drift within its recent range as it tests for stronger directionality amid mixed signals from both economies.
What could change it:
• Upside risk: A significant improvement in UK retail activity could provide momentum for the pound.
• Downside risk: Further declines in commodity prices could reduce support for the NZD, exacerbating GBP losses.
