Strategy Trade update: Sticky NZ inflation and UK political developments

Research evidence excerpt

Strategy Trade update: Sticky NZ inflation and UK political developments

Global Markets Research

Strategy Trade update 21 July 2026

Rates - Global

Research Analysts

Short GBP/NZD

Global FX Strategy

Dominic Bunning - NIplc

Sticky NZ inflation and UK political developments dominic.bunning@nomura.com

+44 (0) 20 7102 4063

The trade Yusuke Miyairi, CFA - NIplc

We retain a high conviction level on our short GBP/NZD trade of 4/5 , maintaining a yusuke.miyairi@nomura.com

target of 2.25. The original entry was 2.3390 on 26 June 2026. +44 (0) 20 7102 4145

Andrew Ticehurst - NALRationale

andrew.ticehurst@nomura.com

We opened this trade on 26 June and raised the conviction level on 8 July following a +61 2 8062 8611

hawkish RBNZ rate decision. The latest inflation data in New Zealand were firmer than

expected. Meanwhile, comments from new UK Prime Minister Andy Burnham about using

“any flexibility” within the current fiscal rules might keep the market somewhat sceptical

about fiscal sustainability under the new government.

New Zealand CPI inflation firmer than expected – risks of consecutive hikes

Q2 CPI rose 4.1% y-o-y (1.5% q-o-q), stronger than the RBNZ’s forecasts by 0.2ppt on

both measures. Meanwhile, its “core” measure (the sectoral factor model), continued to

run at 2.7% y-o-y, where it has basically been sitting for five straight quarters. However,

non-tradable inflation did slow to 0.6% q-o-q, in line with expectations (Fig. 1 ). We think

this print might slightly increase the risk of a string of rate hikes by the RBNZ. While our

economist’s base case is for hikes in September and December, sticky inflation could

push the RBNZ to try to get back to neutral (c3%) a little earlier, with back-to-back

hikes in September and October.