GBP/NZD Pair Rally after Rate Hike by BoE

British MoneyThe GBP/NZD currency pair has been on the uptrend since October 15 where it has gained 1,000 pips to reach 1.9330 levels. Pound signals uptrend after a rise in inflation due to the rate hike announced by the Bank of England.

On the other hand, the Kiwi Dollar has weakened considerably due to the decline in the prices of dairy products and lack of clear mandate for any political parties in the general elections.

Now, the new coalition government is looking forward to amending the objectives that will be achieved by the RBNZ (Reserve Bank of New Zealand).

Some of the objectives which are mentioned below are probably going to weaken the New Zealand Dollar in due course of time. Hence, in the coming days, we speculate the GBP/NZD to rally further.

The Finance Minister of New Zealand, Grant Robertson, issued a statement where he was found saying that the primary objective of the government is to bring down the unemployment rate to less than 4 percent. It is currently at 4.8 percent. The Finance Minister has sought help from Reserve Bank of New Zealand to help the government achieve the objectives. It is likely that the government would alter the RBNZ Act to bring the unemployment rate under 4 percent.

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In future, it is likely that the government would curtail the interest rate. At the moment, the benchmark rate is 1.75 percent. The interest rate differentials have made the New Zealand Dollar buoyant. The lower official cash would certainly take away this advantage. Investors would not be willing to enter into a trade if the interest rate differentials are not attractive.

Analysts are of the opinion that the prevailing interest rates are quite attractive for the existing economic scenario. The government should not curtail the interest rates because it would be prone to risk thereby causing an imbalance in the economy. The housing market at the moment is very overheated, and low-interest rate would create chaos in the overall cost of housing. Hence, on the whole, it is an adverse development for the New Zealand dollar.

Meanwhile, the inflation rate is rising in the United Kingdom, and it has crossed 2% mark. Economists have speculated that Bank of England would certainly increase the interest rates during the policy meeting in November 2017. Like thought, the central bank of UK has increased benchmark rates by 0.5 percent. During the meeting, 7 out of 9 members voted for interest rate hike. This would undoubtedly minimise the interest rate differentials between the UK and New Zealand which means a decline in demand for Kiwi dollar.

Also, agreement on Brexit is likely to happen in December 2017. Michel Barnier, the Chief Negotiator of European Union, want to speed up the Brexit talks whereas David Davis of UK has hinted additional concessions to EU nationals. This would certainly minimise the pressure on Pound which means rally in GBP/USD is likely to happen.

GBPNZD Pair Nov 3rd, 2017

GBPNZD Pair Nov 3rd, 2017

According to the price chart, the currency pair is trading at 1.8860 levels. Also, the RSI indicator is in the oversold region. It is expected that GBP/USD would move up to reach the next resistance level at 1.9280.

Based on this analysis, traders are advised to open a LONG position in the currency pair preferably near 1.8860. Also, traders should place a stop order loss below 1.8740 and dilute the LONG position near 1.9140.

Apart from opening a LONG position in the currency market, traders can buy a call option from any reputed binary options broker to maximise returns. Traders should select an expiry period around March 11, 2018, when the currency pair is trading near 1.8860.

Rich Archer

Rich Archer

Hi, my name is Rich Archer. I am living in London. Welcome to Binary Manual. Reach to Binary Options broker reviews and market news here.


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