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GBP/NZD set for a key test as BoE stays hawkish and RBNZ hikes eyed
Markets price an 88% chance of an RBNZ hike in September, while political uncertainty around Labour leadership keeps sterling more sensitive than usual.
Sterling is entering the week with a mixed tone as investors weigh a hawkish Bank of England backdrop against ongoing political uncertainty, while the New Zealand dollar is largely supported by expectations for tighter policy.
According to Action Forex, last month’s BoE decision was hawkish, with the vote split 6-3 to hold rates and three members pushing for a hike, reflecting concern about inflation pressures as Middle East-driven energy costs filter through the economy. The same outlet notes that political uncertainty after Keir Starmer’s unexpected June resignation may leave sterling more reactive to how Labour manages the transition.
For GBP/NZD, the kiwi’s support is coming mainly from rate expectations, with markets pricing an 88% probability of an RBNZ hike in September, even after New Zealand’s unemployment rate rose to a decade-high 5.6%. Action Forex adds that UBS argues the labor data is less bearish than it appears because the increase was driven more by workforce entry than layoffs, though softer inflation expectations and a weaker July manufacturing PMI are creating some doubt about how far the RBNZ can go.
The pair is also at a technical crossroads, Action Forex reports, with GBP/NZD compressing into a symmetrical triangle since early June near 2.2900-2.2980, where the 100-period EMA sits. A break above the 2.2900-2.3100 support and resistance zone and the descending trendline would point toward a retest of July highs near 2.3550, while a slip below 2.2900 would raise the risk of a move back toward 2.2800 and beyond.