GBP/NZD - off record lows, but well below 1.80

Spike in NZD following RBNZ rate decision pushed GBP/NZD to a record low of 1.7695 levels before profit taking on NZD triggered a recovery to 1.7890 levels.

Classic case of policy divergence

The sell-off in the GBP/NZD pair since last Thursday’s BOE bazooka is a classic case of monetary policy divergence. BOE overkill triggered a demand for high yielding NZD. Moreover, RBNZ was expected to cut rates, despite which yield differential remained in favor of NZD, given the interest rates even at record low of 2% are way above zero lower bound seen in the UK and across Europe.

The cross may see resurgence, but that is likely to be a chart driven move as yield differential is likely to stay in favor of NZD.

GBP/NZD Technical Levels

A break above Asian session high of 1.8033 could yield a move to 10-DMA hurdle of 1.8256. On the lower side, breach of 1.7807 (hourly chart support) would open doors for record low of 1.7695 levels.