Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

GBP/NZD set for big move on Brexit and RBNZ rate review

The technical backdrop on GBP/NZD is intriguing but mired by crosswinds as the sterling swings in response to Brexit and the New Zealand dollar reacts to the RBNZ.

New Zealand dollar Source: Bloomberg

Forex traders eye spot GBP/NZD

  • GBP/NZD has broadly gyrated between $1.85-$2.00 since September 2017, but has potential to breakout from its two-year trading range
  • GBP/NZD could be primed for a big move as the currency pair faces fundamental crosscurrents surrounding Brexit and the RBNZ
  • Brexit developments and monetary policy updates from the RBNZ will likely serve as the domineering catalysts for the currency pair’s next move

The pound, long bogged down by lingering Brexit uncertainty, and the New Zealand dollar, which has faced increased pressure from dovish Reserve Bank of New Zealand (RBNZ) monetary policy, are currencies that both appear set for heightened volatility over the coming days. Consequently, though a less conventional forex pair, spot GBP/NZD could be set for a big move over the short and medium terms.

Brexit risk elevated as 31 October deadline nears

Much regarding the UK’s departure from the European Union (EU) remains unresolved despite British MPs voting to block no-deal Brexit and forcing Prime Minister Boris Johnson to request another extension to the current 31 October divorce date. First and foremost, inking a Brexit withdrawal agreement is still a way away considering commentary from Michael Barnier, the EU’s chief negotiator, who recently said that PM Boris Johnson’s alternative solution for the Irish backstop is 'unacceptable'. Secondly, delaying Brexit for a third time will once again require unanimous approval from the EU, some who whom voiced disdain after granting the previous deferment.

Markets await RBNZ monetary policy update

Meanwhile, the RBNZ is set to provide its latest monetary policy update this week following the central bank’s August meeting, which delivered a shocking 0.50% cut to its overnight cash cate and second dovish action of the year.

The RBNZ has labelled downside risks to the New Zealand economy stemming from the US-China trade war and its impact on global gross domestic product (GDP) growth, in addition to persistently sluggish inflation readings, as the primary culprits leading to the decisions. In turn, it could be expected that the RBNZ may cut rates further to provide the New Zealand economy with another layer of monetary policy insulation.

At the same time, the central bank could favour a more patient approach going forward as it evaluates the impact from the 75 basis points of cuts already made. That said, while awaiting further clarity on where spot GBP/NZD might head next as the fundamental developments surrounding Brexit and monetary policy decisions from the RBNZ unfold, the long-term technical backdrop of this currency pair could provide some insight.

GBP/NZD price chart: monthly time frame (January 2008 - September 2019)

GBP/NZD price chart: monthly time frame (January 2008 - September 2019) Source: IG charts
GBP/NZD price chart: monthly time frame (January 2008 - September 2019) Source: IG charts

The $2.00 handle has historically served as a major zone of technical confluence highlighted by key monthly levels dating back to 2008, which could keep a lid on further upside progression by the sterling (barring any Brexit breakthrough or full throttle dovish tilt by the RBNZ, of course). This area of resistance is also underscored by the 38.2% Fibonacci retracement level of the currency pair’s 14-month slide beginning in August 2015 from $2.5206 to $1.6480.

GBP/NZD price chart: weekly time frame (September 2016 - September 2019)

GBP/NZD price chart: weekly time frame (September 2016 - September 2019) Source: IG charts
GBP/NZD price chart: weekly time frame (September 2016 - September 2019) Source: IG charts


Honing in on a closer time frame reveals the near-vertical climb in spot GBP/NZD since early August. The move was sparked by a surprise 50-basis point cut from the RBNZ with upside subsequently exacerbated by Brexit news pointing to the reduced likelihood of a no-deal departure.

However, the high of $2.0027 priced back in early May, which aligns with the RBNZ’s first interest rate cut of the year, and last week’s swing high of $2.0005 could pose immediate obstacles for further upside in spot GBP/NZD prices. Looking a little further back brings to light the September 2018 high of $2.0033 before the October 2018 peak of $2.0481 comes into scope, though the former reverted to a fresh year-to-date low the very next month.

Focusing on possible areas of technical support draws attention to confluence around the $1.95 level and 23.6% Fibonacci retracement level of the trading range etched out by GBP/NZD since October 2016. The 10, 20 and 50 simple moving averages (SMA’s) around $1.9150 could provide spot prices with a degree of buoyancy while the $1.90 handle noted by the 38.2% Fibonacci retracement level of the previously mentioned bullish leg might serve as an additional line of defense.

That said, keeping close tabs on changes in IG client sentiment data can offer insight on potential reversals and range trading opportunities as the bearish or bullish bias of retail forex traders oscillate.

IG client sentiment - the pound and New Zealand dollar

IG client sentiment - the pound and New Zealand dollar

Since GBP/NZD is a less liquid cross for both the pound sterling and New Zealand dollar, attention turns to NZD/USD in particular, which has seen a big change in open interest and massive shift in positioning since last week and in the runup to the September RBNZ rate decision. In fact, net longs have jumped 69% whereas net shorts dropped a whopping 43% according to the latest retail forex trader positioning data from IG.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.