Bias: The GBP/NZD outlook is range-bound as the current level sits just above the 90-day average while remaining in the middle of its 3-month range.
Key drivers:
- Rate gap: The Bank of England is expected to proceed cautiously with rate cuts, unlike the Reserve Bank of New Zealand, which has already reduced rates to stimulate the economy.
- Risk/commodities: The recent downbeat mood in the market has put pressure on risk-sensitive currencies like the New Zealand dollar, potentially benefitting the pound.
- Macro factor: Global trade tensions, particularly U.S. tariffs impacting New Zealand exports, add further uncertainty to the NZD’s outlook.
Range: GBP/NZD is likely to drift within its recent range, with limited volatility expected due to mixed market signals.
What could change it:
- Upside risk: A strong rebound in global risk appetite could strengthen the NZD, lifting it against the GBP.
- Downside risk: Continued risk-off conditions could elevate the pound, pressing the NZD further downwards.