The Pound was higher versus the New Zealand dollar as the Reserve Bank of New Zealand gets set to release its monthly interest rate decision on Wednesday. The bank is expected to hold interest rates steady at the current record lows and avoid any further stimulus this week, despite the country being stuck in a deep recession. There are hopes that the virus pandemic could be milder than previously expected.
The RBNZ is likely to keep the cash rate unchanged at 0.25% on Wednesday for a fourth-straight meeting. Economists are expecting the bank to hold rates steady for the rest of the year and this was boosted by the country’s GDP release last week.
The New Zealand dollar has strengthened from the August 20th high in the Pound due to the Brexit fallout and the pair should continue to see further strength after the Bank of England noted in last week’s monetary policy minutes that they had already discussed negative interest rates. This was sooner than markets expected and led to gains in the New Zealand dollar, which already benefits from the interest rate differential of 0.24 basis points against the pound.
Data released last week for the NZ economy showed a 2.2% quarter-on-quarter contraction in GDP that was smaller than the 12.8% decline analysts expected. This helped to remove the rate cut chatter that was hanging over the Kiwi. The rise in virus cases in the U.K. is higher than in NZ and this is another risk to the GBPNZD pair.
GBPNZD Technical Outlook
GBPNZD trades at 1.9138 after gaining on the day by 0.22%. The bounce is just ahead of the support level created by the lows in July and could be tested with the rate decision. Resistance for the pound comes in at 1.9400 and further gains are possible to the 50-day moving average at 1.9600. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
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GBPNZD Daily Chart
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