GBP/NZD has been firmly higher over the start of the year, with GBP benefitting from reduced Omicron fears. With data showing that the variant is far milder than previous strains, the UK government has confirmed that the UK will not be entering lockdown this month.
While there are still risks in the outlook, the market is hopeful that if lockdown can be avoided during this wave, the end of the pandemic will be one step closer. With that in mind, the focus is returning to BOE rate hike expectations with the market currently pricing in around an 80% chance of a hike in February, likely to keep GBP supported near term. With the retail market holding a more than 80% short position, there is plenty of scope for the current rally to continue.
Technical View
The breakout above the 1.9690 level has seen prices accelerating quickly higher within the bull channel from Q4 2020 lows. With both MACD and RSI bullish here, the focus continues to push higher towards the 2.0064 level target while the bull channel holds.
