Pound to New Zealand Dollar Week Ahead Forecast: 2.20 Before 2.40
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Loading... - Antonio Cruz
- 06 Jan 2025
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The exchange rate between the Pound (GBP) and the New Zealand Dollar (NZD) is poised for potential fluctuations in the coming week, with forecasts suggesting a possible test of 2.20 before a retest of 2.40. Last week, GBP/NZD experienced a notable decline of 1.08% on Thursday, driven by a broad liquidation of GBP exposure that occurred unexpectedly.
The recent drop has created a softer technical setup for GBP/NZD, which is now trading below the 9-day exponential moving average (EMA), indicating a bearish trend in the near term. This technical positioning suggests that further weakness could be on the horizon in the coming days.
Historically, GBP/NZD rallies are often followed by pullback or consolidation phases lasting one to two months. Given the current market conditions, there is a strong likelihood that the exchange rate has entered such a phase, implying that the rate may reach 2.20 before attempting to retest the 2.40 level, which would represent the highest levels for GBP/NZD since 2015.
Despite the recent pullback, the multi-year uptrend for GBP/NZD remains intact. A significant deterioration in market conditions would be required to alter this trend. Analysts believe that the current consolidation phase could ultimately lead to another upward impulse, potentially reaching fresh multi-year highs later in the first quarter of the year.
This month is particularly significant due to the U.S. Presidential Inauguration on January 20, which is likely to bring announcements that could impact global markets. The potential for volatility is high, and the trend since the November election has generally favored GBP/NZD gains, with the NZD showing weakness. If this trend continues following the inauguration, the anticipated pullback in GBP/NZD may be less pronounced than expected.
In terms of economic data, there is limited information scheduled for release from New Zealand and the UK this week. However, Thursday's Chinese inflation numbers could be crucial for the NZD, as China is New Zealand's most important export market. If inflation exceeds expectations of 0.1% year-on-year growth, it could positively impact China-focused assets like the NZD and AUD.
Additionally, the U.S. non-farm payroll report set to be released on Friday will be a significant driver of global foreign exchange sentiment. Analysts anticipate that U.S. job gains remained strong in December, with expectations of around 180,000 jobs added, only a slight decrease from 227,000 in November. Given the recent outperformance of U.S. data, there is a high bar for positive surprises, which could lead to market reactions if the data falls short of expectations.
A disappointing jobs report could weaken the USD, bolstering the NZD and applying downward pressure on GBP/NZD as we move into mid-January.
In summary, the GBP/NZD exchange rate is likely to experience volatility in the coming week, with a potential test of 2.20 before any attempt to retest 2.40. The interplay of upcoming economic data, geopolitical events, and market sentiment will be critical in shaping the direction of this currency pair. Investors should remain vigilant as these factors unfold, particularly in light of the anticipated U.S. non-farm payroll report and Chinese inflation data.
