GBP/NZD Outlook: Slightly weaker, but likely to move sideways, as the rate is below its recent average and near recent lows without a clear driver supporting a change.
Key drivers:
• Rate gap: The Bank of England has signaled a cautious approach to rate cuts, which contrasts with the Reserve Bank of New Zealand's intention to stimulate growth through potential further easing.
• Risk/commodities: The New Zealand dollar may face challenges due to new U.S. tariffs that could impact its export revenues while trade tensions linger.
• One macro factor: The UK's GDP growth is projected to slow, influenced by stagnant incomes and reduced public sector spending, which adds pressure on the GBP.
Range: The GBP/NZD is likely to hold within its recent stable range, given the absence of strong directional forces.
What could change it:
• Upside risk: An unexpected recovery in UK economic data could bolster the GBP.
• Downside risk: Further deterioration in the UK's economic outlook could weaken the GBP further.
