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Philip Borkin, Research Analyst at ANZ, points out that the NZD has been one of the worst performing currencies year to date which reflects global themes, but also deterioration in the domestic economic picture that has seen the market embrace the possibility that the RBNZ could cut interest rates.

Key Quotes

“While we retain a bearish medium-term bias for the NZD, tactically we see risks that without this evidence the market could grow impatient, seeing the NZD push higher.”

“The UK, on the other hand, is facing a critical few weeks. Brexit negotiations have so far failed to make meaningful progress. And while there remain a number of permutations that could still play out, without the UK providing Brussels with a workable proposal before the EU Summit in mid-October, the market’s estimated probability of a ‘no deal’ Brexit will rise sharply.”

“Given these risks, we recommend selling GBP/NZD at 1.9760 for a target of 1.920. We set a stop at 2.01.”