Image © Adobe Images
The week ahead should see GBP/NZD downside momentum start to ease.
Last week's selloff in the pound to New Zealand dollar exchange rate (GBP/NZD) is forecast to ease in the coming days as a major support zone approaches and the post-RBNZ repricing in interest rate expectations fades.
The pair dropped a chunky 2.15% last week to print a low at 2.2443 after the RBNZ left interest rates unchanged but signalled strongly that the time to raise interest rates was nearing.
That repricing in rate expectations was reflected in the outperformance of short-dated New Zealand government bond yields, which provided a natural boost to the currency.
That repricing should now be reflected in the markets, which opens the door to slowing downside momentum, and even the prospect that some of those losses are pared.
Although there's a tactical case to expect easing downside and a potential bounce, it can't be overlooked that the technical setup has shifted in favour of further GBP/NZD weakness.
Support at 2.2400 is expected to come under scrutiny and remains the critical level to watch; unless sterling can quickly reclaim the 2.28–2.29 region, relief rallies are likely to be sold into and downside risks will remain elevated through the week ahead.
On the upside, sterling must first recover the 100-day moving average before the technical picture can stabilise.
Until then, rebounds are likely to be viewed as corrective rather than the beginning of a sustained recovery.
Above: RBNZ rate forecasts.
The RBNZ proved to be a surprise for a market that was perhaps expecting more caution regarding the prospect of rate hikes. What was notable from a financial markets perspective was the RBNZ's upward revision to its own forecast path for the policy rate it sets.
In the February projections, the RBNZ expected to gradually take the policy rate to 3.00% by the end of 2028, but it now sees the policy rate at 3.00% in early 2027 and a terminal rate now at 3.25%.
Markets weren't expecting such a bolshy upgrade.
"We continue to expect the first hike in September, but a July start could be on the cards depending on the evolution of data," says Satish Ranchhod, Senior Economist at Westpac.
Do you think the exchange rate will fall from here?
Then today's rate is worth protecting.
Fix it now for a transfer up to 12 months ahead.
Set a target. Let the market come to you.
We execute automatically when your rate arrives.
