NZD/GBP Outlook:
The NZD/GBP is likely to increase as it currently trades above its 90-day average and within the upper part of its recent range, supported by the Reserve Bank of New Zealand's hawkish stance on interest rates.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand has maintained a higher official cash rate compared to the Bank of England, influencing the NZD's stronger position.
• Risk/commodities: Global dairy prices have risen, enhancing New Zealand's trade balance and bolstering demand for the NZD.
• One macro factor: Ongoing geopolitical tensions, particularly between the US and Iran, are creating turbulence in market risk appetite, indirectly benefiting the NZD.
Range:
Expect the NZD/GBP to hold steady while occasionally testing the recent highs.
What could change it:
• Upside risk: A surprise improvement in New Zealand’s trade balance could further support the NZD.
• Downside risk: If UK retail sales significantly outperform expectations, this could strengthen the GBP against the NZD.