Pound-to-New Zealand Dollar Rate Forecast for the Week Ahead

Modified: Tuesday, 03 April 2018 06:47 BST

- GBP/NZD could be resuming its uptrend after a prolonged correction

- The main release for NZD in the week ahead are dairy prices

- For the Pound PMI business survey data for March is the top priority

1 Pound buys 1.9437 New Zealand Dollars at the time of writing after Sterling moved higher at the start of the new week with the currency looking to put the soft end to the first quarter of 2018 behind it.

GBP/NZD is looking more constructive and looks to be resuming its uptrend after a recent pull-back slowed the exchange rate's progress higher.

Our technical studies suggest Sterling is at an overall advantage over the New Zealand Dollar since the GBP/NZD exchange rate has broken out what is thought to be a triangle formation on the price charts (see below).

After the initial break higher the pair rallied up to a peak of 1.9642 before stalling and consolidating - it is currently trading back down at 1.9468 but appears to be attempting an early recovery.

The eventual upside target for the triangle, calculated by taking the height of the pattern and extrapolating it higher by the golden ratio (0.618), is 1.9800. Given the exchange rate has not reached the target yet, but is extremely likely to eventually, we expect more upside to evolve, quite possibly in the week ahead.

For confirmation of a continuation up to the target, however, we would ideally like to see a break above the 1.9643, March 21 highs first.

The MACD momentum indicator in the bottom panel is rising above the zero-line in support of our bullish forecast.

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Data and Events to Watch for the New Zealand Dollar

The main release in the week ahead is the Global Dairy Trade (GDT) price index because this fixes the price in a fortnightly auction of dried whole milk (and other dairy products) which is New Zealand's biggest commodity.

The Index covers a basket of dairy products including cheese, butter, dried skimmed milk, rennet casein, lactose and anhydrous milk fat.

Two weeks ago the index showed a -1.2% fall which continued a string of other negative results, more details of which are available from the GDT website here.

Further weakness in the price of dairy products could have a negative impact on the Kiwi as it reduces aggregate demand for the currency from foreign buyers.

The auction is on Tuesday, Apr 03 at 15.30 GMT.

Also out on Tuesday is the other main release for the week, the Roy Morgan Consumer Confidence gauge for March, although it is out at 22.00. The previous result was 127.7.

Data and Events to Watch for the Pound

The main releases in the week ahead for Pound Sterling are the PMI (Purchasing Manager Index) business surveys, which provide a timely and reliable gauge of levels of activity and growth in various different industry sectors.

"The PMI for Britain are expected to be down across the board. That would be a fairly negative combination," says Marshall Gittler, chief currency strategist at ACLS Global, in relation to the expected impact on Sterling.

Although Manufacturing PMI has been falling for a while both the construction and service-sector PMIs were up last month which provided a counter-weight to the negative Manufacturing data, however, "that’s not expected to happen this month. As a result, the figures could be negative for the pound," says Gittler.

He is not the only analyst to forecast a negative result, Ryan Djajasaputra an analyst at Investec, says:

"We suspect that the wintery weather during the month may have had an impact and are forecasting a two-point fall in the services PMI to 52.5 and a more modest half a point drop in the manufacturing PMI to 54.7."

Manufacturing PMI is out at 9.30 on Tuesday, April 3, and is forecast to slide to 54.8 from 55.2; Services is out at 9.30 on Thursday, April 5, and is forecast to fall to 54.2 from 54.5; and Construction at the same time on Wednesday and is forecast to decline to 51.2 from 51.4.

To round off the week there is a speech from Bank of England (BOE) governor Mark Carney at 16.15, which is significant as it may hint at whether the BOE still intends to raise interest rates in May as the market currently expects.

An interest rate hike would lift the Pound by supporting inflows of capital from investors seeking somewhere profitable to park their money.

Get up to 5% more foreign exchange by using a specialist provider to get closer to the real market rate and avoid the gaping spreads charged by your bank when providing currency. Learn more here.