GBP/NZD Upside Momentum Builds

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GBP/NZD momentum builds as Bank of England rate hike bets close the gap on New Zealand.

Sterling is comfortably in a short-term recovery sequence against the New Zealand dollar.

GBP/NZD rises to 2.2990 on Monday, that's a half-per cent gain for the day, putting the pair on course for a fifth consecutive daily advance.

Monday's rise means the pair has broken through interim resistance at the 50% Fibonacci retracement of the January-February selloff, which had proven to be a sticking point for the recovery.

GBP/NZD enters a short-term uptrend.

Gains take GBP/NZD above the 50-day moving average (MA) and into the 100-day, confirming a shift in short-term direction.

From here, we favour further upside in the coming days, provided there's a confirmed daily break above the 100-day MA at 2.2987, and look for 2.32 to be tested by early April. That's the 78.6% fib retracement level of the 2026 selloff.

GBP gains follow a marked uptick in UK government bond yields (gilts), which are a result of rising bets the Bank of England will increase interest rates this year to get ahead of inflation.

"A factor that is affecting gilts more than some other markets is a recalibration of policy rate expectations. A week ago there was less than one 25bp hike by the BoE priced in but following the hawkish MPC minutes this week starts with over three 25bp hikes priced by markets for the rest of 2026," says a daily market briefing from Lloyds Bank.

The New Zealand dollar had rallied through January and February as New Zealand interest rate expectations rose, with markets judging the RBNZ was ahead of the Bank of England in a new rate hiking cycle.

That gap is closed now that the Bank of England is expected to join the hiking party and provides GBP/NZD a chance to recover.