Synopsis:

ANZ recommends two medium-term trades for 2025 based on growth differentials, monetary policy divergence, and trade sensitivity. They expect EUR/GBP to weaken as the eurozone lags the UK in growth and the ECB eases more aggressively. Similarly, GBP/NZD is forecast to rise, supported by stronger UK growth compared to New Zealand.

Key Points:

• Sell EUR/GBP on Rallies Above 0.84:

  • Target: 0.80 by year-end 2025.
  • Growth Differential: UK GDP is forecast at 1.5% y/y versus 1.3% y/y for the euro area in 2025.
  • Monetary Policy: The BoE is expected to end 2025 with rates at 3.5%, while the ECB is forecast at 1.5%, making the trade carry positive.
  • Trade Sensitivity: The UK is less exposed to tariffs than the eurozone, with 60% of UK exports in services as of September.

• Buy GBP/NZD Below 2.13:

  • Target: Exits around 2.16–2.18.
  • Recent Performance: GBP/NZD appreciated from 2.00 to a high of 2.19 in 2024.
  • Growth Differential: UK GDP is forecast at 1.5% y/y versus 0.8% y/y for New Zealand in 2025.
  • Monetary Policy: Both the BoE and RBNZ are expected to end 2025 with rates at 3.5%, but the UK’s stronger growth favors GBP.

Conclusion:

ANZ expects EUR/GBP to decline amid weaker eurozone growth and a more aggressive ECB easing cycle, while GBP/NZD is poised for gains as UK growth outpaces New Zealand. These trades align with structural and macroeconomic dynamics, offering medium-term opportunities for 2025.