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Our attention falls on the GBPNZD which has been trapped within a 1500-pip monthly range since August 2023.
Note: GBPNZD is a minor currency pair – one that does not include the USD but has at least one of the world’s majors.
However, prices have trended lower over the past few weeks. This could be based on shifting expectations over the Bank of England (BoE) and Reserve Bank of New Zealand’s (RBNZ) next policy move.
Interestingly, Sterling is down against most G10 currencies month-to-date.
But the New Zealand dollar is flexing its muscles across the board.
Keep all the above in mind, here are 3 factors that could rock the GBPNZD.
The Reserve Bank of New Zealand (RBNZ) is expected to leave rates unchanged at 5.5% next week.
So, investors will direct their attention toward the policy statement and media conference for clues on future policy moves. It is noteworthy that first-quarter inflation printed hotter than expected, injecting RBNZ hawks with fresh inspiration. Any more hawkish hints during the meeting may further push back bets around when the central bank will start cutting rates.
Traders currently see a 50% probability of a 25-basis point RBNZ cut by August with this jumping to roughly 95% by October.
The incoming UK April inflation report will likely impact bets around when the Bank of England will start cutting interest rates.
Markets are forecasting:
Headline inflation is expected to cool significantly with core inflation figures tagging along. A drop in household energy prices over the past year is expected to be the main driver behind this. Should the CPI report match or even print lower than these expectations, it may encourage the BoE to cut rates sooner than expected.
Traders see a 62% probability of a 25-basis point BoE cut by June with a move in August fully priced in.
Prices are under pressure on the weekly charts, currently testing the 50-week SMA and bullish channel. A solid breakdown below the 2.0700 could signal further downside.
Zooming into the daily, there have been consistently lower lows and lower highs. Prices are trading below the 50, 100 and 200-day SMA while the MACD trades below zero.
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