GBP/NZD: Week-Ahead Forecast
GBP/NZD has been in a steady short-term uptrend since the start of the year, rising from lows of 1.7000 to almost 1.8000.
The New Zealand Dollar has certainly lost that upside impetus that has been dominant since 2016 and the next major level the pair is expected to achieve is 1.8000.
This is where the December 2016 high was, and this is expected to cause a substantial amount of overhead resistance to the pair which may struggle to rise above it.
More immediately, however, the exchange rate has pulled back for two days to the base of its ascending channel at 1.7830, where it has formed a bullish hammer candlestick. This indicates it will probably start to resume its uptrend and there is a 66% chance that Monday will result in the exchange rate closing above its open price.
For more cast-iron confirmation of an extension of the uptrend, however, we would ideally wish to see an extension well above the 1.8000 highs, confirmed by a move above the 1.8020 level to a target at 1.8200.
New Zealand Data For Week Ahead: Keep on Going
The economic calendar in New Zealand is light this week and what markets will be looking for those releases that are on offer to maintain the positive stance markets have to the country and its currency.
The week kicks off with New Zealand Electronic Card Sales on Monday, April 10 at 23:45, which is expected to show a 0.5% rise.
This is followed by New Zealand Business PMI at 23:30.
"Indicators for NZ economic activity remain robust and consistent with continued economic growth. Firms’ own activity expectations remain at robust levels, as do employment and investment intentions, confirming NZ domestic economic momentum is likely to continue for now," says Jane Turner, Senior Economist at Commonwealth Bank Australia.
Big Data releases Ahead for the Pound
While New Zealand has little on the calendar we have some big releases in the UK, and this is where any potential moves in GBP/NZD are likely to be derived.
“In the run up to Easter, we suspect we will see a relatively quiet period for political news, with few top tier political events,” says Victoria Clarke at Investec in London.
“With the Easter holidays approaching and with UK Parliament in recess, there is likely to be little by the way of major developments in Brexit talks over the coming week.”
Luckily, for those looking for the Pound to move we have some big data events ahead.
“With fewer political happenings, data will likely move to the fore next week,” says Clarke. “In the UK, data is likely to take centre stage too.”
CPI inflation figures for March are due out Tuesday morning; markets expect to see inflation at 2.3%, unchanged on the previous month’s reading.
Should inflation beat expectations we would anticipate the Pound to move higher.
But we think the core CPI reading will be more important as this presents a better reflection of the underlying strength of UK economic activity and is therefore the figure that would most likely interest decision-makers at the Bank of England.
Markets are forecasting core CPI to read at 1.9%, a little softer than the 2.0% reading seen in the previous month.
Again, should this number beat expectations then look for the Pound to jump.
Labour market data is the next big data event foreign exchange traders will be keeping an eye on and is due for release at 09:30 on Wednesday, April 12.
The claimant count is expected to fall by 3K while the unemployment rate is forecast to remain static at 4.7%.
But watch average earnings data as this is what gives a really good gauge as to the health of the economy and the potential spending power of the UK consumer.
Average earnings with bonuses included is forecast to publish at 2.2%, unchanged on the previous month’s reading.
If the figure comes in higher we would imagine the Pound will move accordingly and we would watch for the GBP/NZD exchange rate to edge up towards the 1.82 target we mentioned in our technical studies above.
Disappointment will likely be punished and we would anticipate GBP/NZD falling back and testing the trend-line.
