Quotes from RBS:
-The deviation of GBP/NZD with our fair value estimate has been narrowing modestly since the end of February driven mainly by the almost 2.8% fall in our model. As BoE rhetoric has turned more dovish, the 5 year UK/NZ swap rate has shifted in favour of the NZD, while the rise in equity and agricultural commodity prices has also provided support for the NZD. The pair now looks to be just over 1% cheap to fair.
-Worries over the UK appear to continue to be reflected via GBP, but the RBNZ may sound more dovish at this week’s meeting given a still strong NZD and the downside economic risks from the drought on the North Island. Nochange in the policy is expected but a more dovish sounding RBNZ could see GBP/NZD move closer to fair.