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GBP/NZD – Gunning for 1.8000?
This morning’s UK inflation report was hot, fueling expectations for more hawkishness from the Bank of England. The UK government could trigger Article 50 any day now, but until they do, rate hike expectations could drive GBP to 1.25. UK CPI printed at 2.3% versus 2.1% eyed while core reading rose to the key 2.0% level from 1.8% forecast. The core reading is now above the BoE’s target rate and was the real reason for the pound rally, as currency markets begin to price in the possibility of a rate hike.
The New Zealand dollar, on the other hand, could come under selling pressure on the back of the RBNZ rate decision. Since their last meeting in February, consumer spending has fallen, GDP growth slowed, the trade deficit widened while dairy prices declined. There was some strength in the services and manufacturing sectors but with the currency so strong, we don’t think that will be enough to ease the central bank’s concerns.
Therefore GBP/NZD has scope to rise further. The pair has no significant resistance until 1.7800-1.8000 corridor while support comes in at 1.7400