Pound Could Break 'Substantially Higher' Against New Zealand Dollar this Week
Sterling is breaking out higher against the New Zealand Dollar at the start of the new trading week.
At the time of writing the exchange rate is at 1.7941 ensuring the GBP/NZD is now 2.57% higher than where it was one month ago.
The pair, which had been moving in a range outlining a potential triangle pattern defied expectations by breaking out above the upper border line of the triangle in a bullish extension:
It is now rising in a steep channel which is forecast to carry substantially higher, probably towards a target at 1.8300.
For confirmation of the continuation we would be looking for a break above the previous 1.7946 highs.
The pair broke out of the incomplete triangle pattern over a week ago but then fell again in a throwback move which found support at the upper borderline where it consolidated for a while before resuming its uptrend again.
It’s now poised to make further gains as the breakout fulfills its promise.
Data Ahead for the New Zealand Dollar
Despite the positive prognosis for GBP/NZD, the fundamental backdrop underpinning the NZ Dollar remains relatively robust.
Recent data has shown a narrowing of the trade deficit and analysts at Commonwealth Bank of Australia expect the gap to disappear at some point in the next year and the country to start to show a surplus again.
A trade surplus is supportive for a currency as it indicates net demand for it.
The recent deficit was caused by falling prices and volumes for fruit and dairy products but this is forecast to turn around by Commonwealth, and this will probably be mildly supportive for the currency.
The Reserve Bank of New Zealand meanwhile maintain a neutral policy stance and are not expected to alter the relatively high 1.75% interest rate for over a year at the very least, even longer according to some analysts.
Data in the week ahead sees the release of the NIEZR Business Confidence survey in Q1 at 23.00 GMT on Monday, April 3 and Global Dairy Prices on Tuesday, April 4 at 10.30 in the morning.
UK Data
The main data releases in the week ahead for Sterling will be UK Purchasing Manager surveys (PMIs) for March, which are important forward-looking gauges of sentiment in major sectors of the economy.
Manufacturing PMI is out on Monday, April 3 at 9.30 GMT and is expected to remain unchanged at 54.6.
Construction PMI is out on Tuesday at the same time and is forecast to remain at 52.5.
Finally, Services PMI is released on Wednesday at the same time and is expected to rise two basis points to 53.5 from 53.3 previously.
