Pound to New Zealand Dollar Week Ahead Forecast: New 12-Year Highs if UK Data Falls into Place

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The Pound to New Zealand Dollar (GBP/NZD) exchange rate is bullishly aligned and can print fresh 12-year highs if this UK's busy event calendar lands as expected.

The trend in GBP/NZD remains bullish, with the exchange rate trading above the nine-day exponential moving average, which is a blunt signal to use that the trend for the coming few days is constructive.

Last week's 12-year peak at 2.2098 saw the Relative Strength Index (RSI) on the daily chart kiss 70, which triggered an overbought condition that would want to unwind via a pullback in the exchange rate or a consolidation.

A look at the chart below also shows the exchange rate was running well ahead of the nine-day EMA by midweek, which we thought was unsustainable and demanded a pullback.

We saw this play out into the weekend, helped by a disappointing UK GDP print that showed the economy shrank 0.1% in October for a second month in succession.

The RSI is now at 63 and pointing higher again on Monday, which is consistent with the upside being preferred and is why the Week Ahead Forecast is consistent with a retest of last week's peak just below 1.21.

GBP/NZD faces a busy UK calendar this week, as well as Wednesday's all-important Federal Reserve decision.

A retest of the 12-year high becomes possible if Tuesday's UK labour market statistics reveal an ongoing stubbornness in UK wages, which would be consistent with the Bank of England keeping interest rates unchanged on Thursday.

However, Wednesday will probably be the main test for the Pound, with UK inflation numbers due to be released in the London morning. UK inflation is expected to tick up as it journeys back to the 3.0% level, putting it further out of reach of the Bank of England's 2.0% target and limiting the scope for the Bank to cut rates.

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The U.S. Federal Reserve's decision is due later on Wednesday, and it is the main event of the week for the broader FX market.

Should the Fed prove more 'dovish' than expected, i.e. prompt the market to 'price in' more by way of rate cuts in 2025, then the NZD and AUD would potentially be the biggest beneficiaries in the G10 space.

This can threaten GBP/NZD upside momentum.

The Bank of England will make its latest interest rate decision on Thursday. Rates are expected to remain unchanged.

The vote composition for the decision will potentially move GBP/NZD, with the risk being that more than one policy setter votes for a cut, which implies they are keen to get on with the job.

Yet, it is clear their hands are tied given the drift higher in inflation, and any weakness in GBP/NZD stemming from the Bank of England will be limited.

Indeed, the headline is that the Bank will likely cut only four times in 2025, which can ensure that the Pound retains much of its support from the UK's elevated interest rates.