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GBP/NZD to 2.06?
Considering that the British pound was one of the best-performing currency pairs against the dollar today next to the Japanese yen while the New Zealand dollar was the worst performing it is no surprise to see a sharp rally in GBP/NZD. There’s a good chance that the breakout movies on Monday will last through the rest the week with key UK and NZ data on the calendar. Given the recent upside surprise in UK manufacturing activity there’s a very good chance we could see a rebound in tomorrow’s industrial production report from the UK. Although the banks across Wall Street have been extending out there Bank of England rate hike expectations UK data has been relatively good lending support to GBP. NZD on the other hand has been hit hard by expectations for dovish measures from the RBNZ this week who is widely expected to lower their inflation forecast which would suggest that they may not raise interest rates in 2015. Dairy prices have fallen sharply and inflationary pressures around the world have been easing. On top of that growth in China has been slowing so the RBNZ certainly has reasons to grow more dovish. If that is case, the gains in GBP/NZD could extend to 2.06.
GBP/NZD enjoyed a very strong rally on Monday taking out the key 2.04 level, which was a former support turned resistance. If the currency pair continues to move higher, we should see the rally extend to 2.06. However if the RBNZ fails to lower their inflation forecast, NZD recovers its losses and GBP/NZD falls back below 2.04, a move back to 2.0 becomes likely.