Talking Points:
- IG Client Sentiment shows a flip GBPUSD post BOE, NZDUSD extreme heading into RBNZ
- Sterling was recentlydriven lower following dovish statements from BoE Governor Carney
- An extreme net position has increased the pressure behind Wednesday’s RBNZ rate decision
Retail Trader data shows 58 percent of traders are now net-long the GBP/USD flipping net to a net bullish position following dovish a post-BoE Governor Carney Sterling slide. Carney acknowledged the British Pound faces several headwinds, and argued now is ‘not the time to begin’ normalizing monetary policy – in contradiction to speculation following reports of three MPC members voting for a hike last week.
Meanwhile, NZD/USD sports an extreme skew towards short positions heading into the June 21 Reserve Bank of New Zealand rate decision. The New Zealand dollar has outperformed the United States Dollar with a hefty rally heading into the policy decision. That said, the strong possibility the RBNZ may continue to endorse a wait-and-see posture has traders almost certain the currency’s climb will be more prone to stalling in its climb and in turn expose itself to a correction.
The potential for momentum for both currencies/pairs rests less with the scheduled event risk and more with the backdrop of general conditions. If a significant change in Brexit negotiation posture or the RBNZ not signal a tightening plan through the immediate future, we will be left to the general quiet of the broader markets. Traders would do well to keep close tabs on both scheduled event risk and unwieldy themes given the remarkable positioning behind these pairs moving forward. .
