Chart of the Day Bullish GBPNZD
GBP: ‘Super Thursday’ will be closely watched in the UK, whereby the Bank of England (BoE) issues a policy decision and statement, as well as its Monetary Policy Report (previously known as Inflation Report), followed by a press conference by BoE Governor Mark Carney. Markets expect the BoE to stick to an air of caution as a highly uncertain election campaign gets underway. GBP edged lower overnight as latest polls saw the Tories losing ground and their campaign suffering from cabinet resignations.
NZD: key variables from the NZ labour market data releases were close to market expectations, so they didn’t make the RBNZ’s rate decision next week any easier to second-guess. On the inflationary side, annual wage inflation made fresh highs for the cycle to rates not seen in a decade. However, on the activity side, employment growth remained sluggish, while the unemployment rate nudged up to 4.2% after the lunge down to 3.9% in Q2. Perhaps fearing a stronger result, the market’s interpretation was that the data slightly increased the chance of the Bank delivering a 25bps rate cut next week, with OIS pricing for the meeting closing the day at 0.83% from the previous close of 0.86%, taking the probability of a 25bps cut up to about a two-in-three chance.
From a technical and trading perspective the GBPNZD has been consolidating recent gains and appears to have completed a correction. Daily & Monthly VWAPs are bullish and price has tested the monthly pivot where decent bids have emerged. I am watching for a breach of yesterday’s highs to initiate long exposure targeting a test of the monthly R1 at 2.07, a close above here would add further bullish momentum and open a move to test the equidistant swing objective sited at 2.10.
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